Government still has no answers for businesses on Brexit
And despite the government being in ‘listening mode’ to businesses, their message isn’t getting through.
Since the election, the government has attempted to reset its relationship with businesses over Brexit who, as the Financial Times reports, felt their voices were not being heard. With that in mind, Brexit secretary David Davis convened a meeting with over 30 senior business leaders early in July at Chevening House. It would be a chance for the government to listen to the concerns of business as well as reassure them of its plans.
However, according to The Times, Davis’ business charm offensive is not doing so well because the government still had no answers for the various regulatory and commercial concerns being raised. Indeed, one business leader told the newspaper “the problem is there are a lot of questions that aren’t being answered by ministers or their officials”. Perhaps more tellingly, the business leader also explained that on issues such as regulatory equivalence, “the questions aren’t being answered because, we are told, they can’t be answered”.
So much for providing clarity and certainty.
Is the government even listening to business?
There are growing calls from business leaders for the government to secure a transitional deal that will ensure the UK doesn’t fall off a cliff when it leaves the EU. At a recent speech, CBI director-general Carolyn Fairbairn called on the government to agree a transitional deal that would see the UK stay in the single market and customs union until a new free trade deal is agreed.
The prime minister has already accepted that a new free trade deal cannot be completed within the Article 50 timeframe. She has also accepted that an “implementation” period is needed to allow time for businesses and the public to adapt. But the Brexit secretary maintains that an implementation period cannot include single market and customs union membership.
Despite reports of splits within the cabinet around Brexit around any transition or implementation period, Theresa May appeared to confirm this position at PMQs today. Politics Home reports Labour’s Pat McFadden asking the prime minister about whether leaving the single market also covers the promised implementation period for Brexit to which she said “there will then be an implementation deal but we are very clear that at the point at which we reach the end of those negotiations we will be out of the EU”. This is not quite as clear as she suggests, however, because we know that non-EU members such as Norway and Switzerland largely accept the EU’s four freedoms to be in the single market. So the UK could leave the EU in March 2019 and enter an implementation deal with the EU that is similar to what Norway or Switzerland have.
Perhaps the lack of clarity and certainty is because the government is still trying to figure out what it wants from Brexit as well as what it wants from an implementation period. The comment by the business leader to The Times that questions aren’t being answered because “they can’t be answered” comes to mind…
In a piece by former EU trade negotiator Miriam González Durántez, she writes the government hasn’t changed its views on Brexit since May’s Lancaster House speech. This is essentially the view that Britain can have its cake and eat it. And as such, be out of the single market but still have “frictionless” access as well as be able to agree new trade deals easily with a whole host of countries.
Durántez notes think tank Legatum Institute is influential and key to these views. They were also at the table at Davis’ Chevening House meeting. Legatum Institute’s views are in contrast to that of CBI’s. In a recent piece in Conservative Home, the chair of Legatum Institute’s Special Trade Commission argues against staying in the EEA and customs union during an implementation period.
The conflicting views between businesses and Legatum Institute may explain the government’s position and it’s worth reading Durántez’ piece in the Guardian. As she and many economists have pointed out, however, even if the UK could quickly agree new trade deals with countries including the US, Canada, Australia, New Zealand and others, it is unlikely to compensate for lost trade with the EU.
This view of Brexit also ignores the fact that many foreign investors see the UK’s membership of the single market and customs union as a huge benefit. This note from Japan’s government about Brexit and reported on by Business Insider pretty much sums it up.
With the clock ticking on Brexit talks, Durántez concludes the government may not just be negotiating against time but “negotiating against time in pursuit of delusional and unrealistic ambitions”.
Meanwhile, the UK is losing jobs, losing investment and losing influence.