The Government must secure a Brexit transition “as close as possible [to] the status quo” ahead of “serious decisions” in the coming months to relocate jobs out of the UK, the five leading business lobbying groups have warned David Davis.
In a strongly worded letter to the Brexit Secretary obtained by Sky News, organisations including the CBI and British Chambers of Commerce demanded “urgent agreement on transition arrangements to give businesses the certainty and time they need to prepare for a new UK-EU economic partnership”.
The letter, which was also signed by the bosses of the Institute of Directors, the manufacturers’ group EEF and the Federation of Small Businesses, was described by sources as the most forthright warning to date from the “big five” business lobbyists.
Collectively, the quintet represents members employing millions of private sector workers, making theirs a powerful voice in the quest for a smooth Brexit which slows the momentum towards big headcount reductions in UK company workforces.
People close to the groups say they are increasingly concerned about the possibility of ministerial backtracking on transition arrangements despite Theresa May’s commitment to an implementation period that would last for about two years.
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The letter was sent to Mr Davis amid reports that he is preparing to present an “upbeat assessment” of a no-deal Brexit to Cabinet colleagues at the end of the month.
While many of the sentiments in it have been expressed separately by the likes of the CBI and IoD, the letter is the first time they have issued such an explicit collective alert about Brexit threats to growth to a Cabinet minister.
“Agreement [on a transition] is needed as soon as possible, as companies are preparing to make serious decisions at the start of 2018, which will have consequences for jobs and investment in the UK,” the letter said.
“And the details of any transitional arrangement matter: the economic relationship the UK and EU has during this time-limited period must match as close as possible the status quo.”
There remains uncertainty about whether Britain would remain part of a customs union with the EU during a transition period, with consequent doubts about the movement of goods between them.
Concerns about the potential impact on the UK’s financial services sector heightened last week when the chairman and chief executive of Goldman Sachs tweeted that he would be spending “a lot more time” in Frankfurt after Brexit.
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In their letter, the five business groups urged ministers to maintain the UK’s existing economic participation in the single market and “the current terms of a customs union” during transition.
“This would provide the greatest economic continuity and could be agreed quickly, ensuring discussions could move swiftly on to our long-term future relationship with the EU,” they said.
Significantly, they did not specify a period for the transition, arguing only for it to “last until a new deal is in force and gives enough time to adjust”.
Their letter also addressed the tensions within Whitehall about whether Britain would accept new EU regulation during the period of a transition – something Boris Johnson, the Foreign Secretary, and other Brexit hardliners have sought to oppose.
The business groups acknowledged that while accepting new rules and European court judgements would raise “political challenges, [a] failure to do so would create legal confusion and regulatory hurdles, undermining the effectiveness of the transitional arrangement and the certainty it seeks to provide”.
One source described the letter as an attempt to strike a realistic balance between the competing agendas within the Cabinet.
The business groups suggested that a lack of formal representation within the EU during transition need not handicap the Government, if it maintained “maximum representation in European regulators, agencies and bodies”.
“Mechanisms should also be agreed through which the UK could challenge any legislation it felt was designed to disadvantage the UK,” they said.
And they urged Mr Davis to ensure that disruption to employers was minimised as far as possible.
“It is vital that companies only have to undertake one adjustment as a result of the UK’s withdrawal, not two – and that businesses, the UK Government and authorities in the EU have enough time to make the changes needed to deliver Brexit successfully,” they said.
The lobbying groups suggested that the Government use the transition period “to bolster our trade framework and build capacity inside the Department for International Trade,” reflecting mounting anxiety about the ability of Liam Fox’s ministry to strike rapid bilateral trade deals.
They also called for the Government to publish its position on an implementation phase in order to “send EU negotiators a strong positive signal of the Government’s readiness to discuss this economically crucial issue”.
None of the business groups contacted by Sky News would comment on the letter.
A Department for Exiting the EU spokesman “The Prime Minister proposed a strictly time-limited implementation period in her Florence speech and was clear in her Article 50 letter that agreeing this principle early in the process would help minimise unnecessary disruption to businesses in both the UK and the EU.
“We are making real and tangible progress in a number of vital areas in negotiations. However, many of the issues that remain are linked to the discussions we need to have on our future relationship.
“That is why we are pleased that the EU has now agreed to start internal preparatory discussions on the framework for transitional arrangements as well as our future partnership.”