22 July 2018

  |  CBI Press Team

News

It's not perfect, but business can work with this

Director-General Carolyn Fairbairn outlines the business view of the Chequers deal and stresses the need for compromise to resolve the Irish 'backstop' issue.

It's not perfect, but business can work with this

Can business work with the Chequers proposal? After speaking to many CBI businesses, from carmarkers to chemists, the answer is a qualified yes. The plan is not perfect and has serious gaps that need filling, especially in services. But yes, for business it is enough of a blueprint to start the process of a real trade negotiation. And start we must - or the clock runs down to zero. 

The important test is whether the proposed deal works for our economy. And on this three pieces of good news stand out. First, the proposed free trade area with a common rulebook for goods is a genuine breakthrough. It will protect thousands of British jobs in just-in-time manufacturing and supply chains. UK influence over the rules is needed – that’s for negotiation. Second, while the proposed customs system is new and untested, business wants to get into the technicalities, understand what it means, and - if it can deliver frictionless UK-EU trade - embrace it.

Finally, services firms will welcome steps to maintain free-flowing data, mutual recognition of qualifications and mobility for skilled people. However, much more is needed to secure market access. Concerns in insurance and broadcasting are particularly acute. Getting it right for British services – 80% of our economy – is crucial.

So the verdict from business is that the White Paper delivers a decent baseline. The critical thing is what happens next. Recent political turmoil has worried many companies. They see consensus melting in the summer sun and the prospect of no deal rising. This leaves them no choice but to trigger contingency plans for a cliff edge Brexit next March. Stocks are increasing, warehousing is becoming scarce, jobs are being moved and investment is being cancelled. This is not what anyone wants.

Three urgent and pragmatic steps are needed to stem the flow, reassure business and safeguard our economy.

Top priority is to unlock a transition period starting in March. This is essential to maintain business confidence and requires urgent agreement on legal wording of the Irish backstop within the EU Withdrawal Agreement. And it cannot wait till October. Firms are clear that any solution to the Irish border must safeguard trade at every point of the compass. Resolving the current stalemate must be the first and overriding priority for both sides this summer, and will need real flexibility from the EU.

Once the Withdrawal Agreement is secure, gaps in the White paper on service access and regulation need addressing and filling. And for this to work, businesses must be round the table. The future immigration system also remains a serious source of uncertainty. Companies need to know what the future immigration rules will look like and that there will be enough time to adjust. They are unanimous that the non-EU visa system is not a solution for EU workers. If Global Britain is to mean anything, we must remain open to the world.  

The third priority is not to go backwards. EU negotiators must now engage constructively with these serious UK proposals. And let’s be clear on one thing - a Canada-style free trade deal would be a very poor outcome, and not much better than no deal. Firms would be bound by two sets of regulators and need to pay for two sets of licences. They may even need separate product lines. All add cost and harm competitiveness.

Only this week a new study by London School of Economics Consulting concluded that any delays could lead to shortages and price rises of kitchen table essentials, including milk and butter. The UK receives 98% of its dairy imports from the EU. By contrast Canada does less than 10% of its trade with the EU, which remains our largest trading partner. The UK’s top exports to the EU are financial and business services, Canada’s are pearls, stones and precious metals. Any deal seeking to replicate CETA is an ocean away from what the UK needs.

Summer is upon us. It is now in everyone’s interest to take a step back and put politics and dogma aside. The Chequers proposal does not meet every business hope but, with common sense and extraordinary effort, it can be made to work for firms and form the starting point for a pragmatic Brexit that puts the economy and people’s jobs first.