Oliver Haill Sharecast | 04 Aug, 2017 13:40 - Updated: 13:40
UK needs transitional arrangement for Brexit, business chiefs warn
Britain should consider pushing back the 2019 Brexit deadline as the simplest way to managing all the trade deals and other arrangements for leaving the European Union, business leaders urged on Friday.
With the Bank of England cutting forecasts for growth this year and next as it sees worries by businesses and consumers about Brexit crimping investment and spending, there is an urgent need for the government to agree a "transitional, interim or bridging" arrangement, the Institute of Directors said in a new report outlining the growing Brexit concerns of UK big business.
"Given the unprecedented and comprehensive nature of trade negotiations to come, mitigating this risk early on is essential to a smooth exit," the IoD's Bridging the Brexit Gap report said.
“Businesses will be pleased that Ministers increasingly acknowledge the importance of a transition period in the Brexit process to minimise economic disruption," added Allie Renison, head of EU and trade policy at the business body.
She said that prioritising interim arrangements would mitigate much of the risk of Brexit and "means the eventual opportunities aren’t diminished by short-term chaotic cliff edges".
The IoD put forward a range of options for transition in hopes of encouraging the government into action.
Extending the Article 50 deadline of March 2019 was suggested as the simplest solution on paper as it would give the UK government "more time to negotiate a new trading relationship with the EU as part of its withdrawal agreement, and would be the easiest to square with the World Trade Organisation", but would be very politically challenging option for the EU and in the Commons.
The IoD also said the ‘off-the-shelf’ option of joining the European Economic Area, like Norway, Iceland and Liechtenstein, to give UK a degree of autonomy in implementing EU rules but is "not straightforward" and would be difficult in the tight time Article 50 constraints.
The EU Council's suggestion to prolong the application of EU law -- the 'acquis' -- in the UK could provide a simpler, comprehensive solution to fit within time limitations but is "likely to leave the UK with less control or input than the EEA option" and "would also make the EU more likely to dictate the terms of how the acquis prolongation would work compared to the EEA agreement mechanisms".
A transitional customs agreement could accompany the other options and replicate the benefits of being in the EU Customs Union, it would need to include maintaining Common External Tariff alignment and continuing to transpose EU customs & VAT legislation.