‘Stay in customs union or lose jobs to Europe,’ says CBI

The head of the UK's largest business organisation, the Confederation of British Industry (CBI), is calling for the nation to remain in a customs union with the European Union after Brexit.In a wide-ranging speech, Carolyn Fairbairn, director-general of the CBI, which has a membership of 190,000 firms, criticised the government for adopting "too much ideology, too little urgency" in the negotiations, leaving businesses "deeply apprehensive" about the outcome.

Businesses relocating because of Brexit

In a speech at Warwick University, Ms Fairbairn said business wanted to see agreement on a transitional deal with the EU by the end of March and for the framework for a future trading relationship set out in principle by October.“Decisions must be taken fast, or firms will have no choice but to trigger their Plan B's," she said. "More jobs and investment will leave our shores and future generations will pay the price.”Ms Fairbairn said that neither the Canadian nor Norwegian models of trade deals with the EU represented the best solutions for UK businesses. Instead, she called on both sides to revisit "red lines" and put economics before politics to protect jobs and communities in both Britain and the EU.The starting point for negotiations should be the rules that are already shared. She said most businesses with supply chains crossing the EU will want to maintain current arrangements, although there could be divergence in other areas."We know future divergence might come at the expense of smooth access to EU markets for goods made according to new domestic rules. But if that is right for jobs, living standards and prosperity, then that's a choice to be made," Ms Fairbairn said.She added that the benefits of remaining in the customs union far outweighed the potential benefits of bilateral trade deals. “The idea behind a customs union is simple: a single set of tariffs for goods imported from outside the EU, enabling tariff free trade within it.

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“It brings no obligations over freedom of movement, or payment and removes some of the heaviest trade barriers. Importantly, it would go a long way towards solving the border problem in Ireland. There may come a day when the opportunity to fully set independent trade policies outweighs the value of a customs union with the EU - a day when investing time in fast-growing economies elsewhere eclipses the value of frictionless trade in Europe. But that day hasn't yet arrived."

UK products and services in high demand

Ms Fairbairn pointed out that the global economy was booming and that UK products and services were in demand the world over.“We couldn’t be better placed to be international leaders in the industries of the future - from tech and life sciences to advanced manufacturing and education," she said. “Yet while UK businesses are optimistic, they are also deeply apprehensive.“They’re not looking for a referendum re-run, but do need a good Brexit deal to keep investing and creating jobs - and speed matters. Firms warmly welcomed progress in December but January has brought a cold dose of reality.“The EU is adamant the only options are existing models that don’t serve either side. The UK team can’t agree with itself, let alone with the EU. There’s too much ideology, too little urgency."

The importance of free trade

She called on both sides in the negotiations to adopt one simple principle, "to start with rules we already share, and move on from there.” She added, “They have been 40 years in the making and support millions of jobs and communities across the UK and Europe.“For many sectors of our economy, this approach could make all the difference. Our aerospace, automotive and chemicals sectors, for instance, have highly integrated European supply chains. Each business in that supply chain benefits from consistent regulation – and most want to maintain it.“We know future divergence might come at the expense of smooth access to EU markets for goods made according to new domestic rules. But if that is right for jobs, living standards and prosperity then that’s a choice to be made.“The EU has already set useful precedents for creative solutions – Turkey, Ukraine, Switzerland, even Norway were all new models once.“Of course, we’d need new ways to manage disagreement – perhaps a new independent court or joint committees to discuss rule changes.“A flexible solution of this kind could preserve many benefits of barrier-free access to the single market while respecting the referendum call for more control – meeting the needs of business and politicians on both sides of the Channel.”Reacting to the speech, a spokesman for the Department for Exiting the European Union said, "The EU has said they will offer their most ambitious free trade approach and we are confident of negotiating a deep and special economic partnership that includes a good deal for financial services – that will be in the EU's best interests, as well as ours."We have already made good progress, having reached an agreement with the EU on a range of issues such as citizens' rights and the financial settlement. But, as the prime minister has already made clear, we will be leaving the single market and the customs union after EU exit day."

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Read more about the future of UK business in the Winter issue of our magazine 

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