Brexit: CBI makes single market membership demands

CBI director general Carolyn Fairbairn

The UK’s main business lobby has demanded that the country remain in the single market and customs union for the foreseeable future as it warns members are already shelving investment decisions and struggling to recruit EU staff.

In a speech at the London School of Economics on Thursday evening, CBI director general Carolyn Fairbairn said a transitional agreement was needed fast. “Waiting until March 2019 is too late.”

“A major European engineering and electronics firm has told us it has shelved plans to build a UK innovation centre.

“A UK infrastructure provider is already having problems retaining and recruiting skilled workers from the EU needed to build the rails, roads and houses already planned.”

Currently, businesses are preparing for two transitions, but an agreement to remain in the single market and customs union until an EU-UK trade deal is agreed would mean businesses would only have to prepare for one.

Fairbairn says businesses are not attempting to derail Brexit.

“We’re seeking the most ambitious and comprehensive free trade deal ever agreed in history.

“A deal which makes sure bakers in Northern Ireland can sell their bread to Dublin without delay and barriers. A deal where car manufacturers can continue to bring in parts from all over the EU without red tape.

A deal where cosmetics firms can work under one set of standards across Europe. A deal where our services firms, which are 80 per cent of our economy, can continue to export to their main market, in particular our financial services.”

However, earlier in the day the EU’s chief negotiator Michel Barnier warned the UK that it will be impossible to achieve “frictionless” trade if it leaves the single market and customs union.

Barnier expressed frustration that the UK did not understand the EU’s red lines in this area.

‘No deal’ would be costly

Non-tariff barriers would be just as costly to businesses and consumers as tariffs if the UK leaves the European Union with no deal, warned CBI chief economist Rain Newton-Smith, who joined Fairbairn at the lecture.

The average tariff on UK goods exports to the EU would be around 4 per cent, but some exports would be much higher, such as meat, which would face a tariff of 26 per cent.

Newton-Smith adds the competitiveness of UK car exporters would also be seriously affected.

In total tariff costs would be £4.5bn to £6bn a year or up to 0.3 per cent of GDP.

Newton-Smith says the weakened pound would only offset the cost “to a point”.

Non-tariff barriers would be equivalent to an additional tariff of 6.5 per cent, says Newton-Smith.

“Without a deal, UK business would face new paperwork requirements making trade more complicated and less efficient. It’s likely this could have a bigger impact on competitiveness than tariffs, especially for small companies.”