Our leaders should offer businesses a practical Brexit

 

Howard Shore, Founder, Puma Brandenburg Ltd & Shore Capital Group Ltd

With the European Council last week and another Cabinet away day planned to agree the Government’s final negotiating position, several big multinational companies have again entered the Brexit fray to speak for the business community.

While the views of Airbus, BMW, and the like, should be taken seriously, they should not be taken as being representative of British business. The tone of debate sometimes suggests all British businesses are regularly trading with the EU, when only 6pc (including SMEs of all sizes) export there, accounting for 12pc of GDP.

Shore Capital’s own research, conducted ahead of the referendum with Business for Britain, found that only one in three exporting companies planned to increase trade with the EU. Why, therefore, should the vast bulk of UK business be tied to EU regulations?

My experience of talking to companies of all shapes and sizes suggests that they want a practical Brexit deal.

They feel that two issues are currently missing from the debate: the global perspective and our future migration policy. Many see the EU’s behaviour in relation to the Irish border for the negotiating ploy it is. Too often, the global perspective is overlooked in the Brexit debate, with the entire focus being on UK-EU relations, almost ignoring our opportunities with the rest of the world.

                            

 

 

 

 

 

"My experience of talking to companies of all shapes and sizes suggests that they want a practical Brexit deal."

Britain can only have an independent trade policy if we are not members of the customs union, but this has been presented as an acceptable outcome by the CBI and others. Decoupling the UK from the protectionist EU trade bloc was a key reason why 17.4m people voted to leave, so this clearly isn’t a suitable solution.

Moreover, many business leaders were concerned by the EU’s direction of economic travel, with increasing levels of regulation strangling enterprise, and higher taxation reducing the incentive to invest. The final deal cannot involve staying in the single market in all but name. Without the free-market, free-trading influence of the UK, the EU looks set to travel even further in the wrong direction, so we need to find a mechanism to facilitate trade in goods and services without leaving us as a rule-taker.

The EU Withdrawal Bill approved by Parliament last month incorporated existing EU law into British law, to facilitate a smooth Brexit. Going forward, a key question will be how we facilitate divergence with the rules governing the single market.

A good template for this can be seen in financial services. Brokers wishing to sell certain services into the US must comply with SEC regulations for those operations, while always being regulated by the FCA. Similarly, in automotive manufacturing, there are car factories in Britain with assembly lines set up to produce vehicles compliant with the specific, unique regulatory standards for export markets across the world.

Many business leaders were concerned by the EU’s direction of economic travel.

So, post Brexit, businesses exporting to the EU will of course have to comply with EU regulations, just as they comply with US regulations for goods sent across the Atlantic.

This will prevent companies from having an unfair advantage over their EU competitors, while stopping the UK becoming a rule-taker from the EU for economic activity taking place solely in Britain.

The debate about how to maintain frictionless trade between Britain and the EU has crystallised on the issue of the border between Northern Ireland and the Republic.

While some claimed this to be an intractable issue, unless Britain remained part of the single market, others have seen the hard-line stance taken by Michel Barnier and others as a negotiating tactic. This theory was given weight last week when EU Commission president Jean-Claude Juncker promised the Irish parliament that the EU would not impose a hard border under any circumstances, including no deal.

Now there appears to be more focus on finding a practical solution, attention must turn to the detail.

Around 80pc of exports across the border come from small or micro businesses, primarily agricultural produce and construction materials. So were Northern Ireland to stay aligned with the Republic for agriculture, especially for animal hygiene issues, this would ameliorate the need for many of the border checks. Moreover, the remaining 20pc of exports come from just over 50 businesses, so a trusted trader scheme would provide a way forward.

Turning to migrant flows across the Irish border, there is no reason why cross-border travel for work should not continue, since both sides benefit.

And more generally across the EU, while business leaders recognise that a clear message from the referendum was that free movement will end, they also want to understand how migration will work post Brexit.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

"As with all negotiations involving the EU, the final breakthrough comes at the end, so a practical deal is still the most likely outcome."

So it is good news that Sajid Javid is starting to look into this and will be coming forward with plans. After all, the British public voted for controlled migration, not no migration, so businesses should have the opportunity to voice their opinion.

As with all negotiations involving the EU, the final breakthrough comes at the end, so a practical deal is still the most likely outcome.

Given the size of our economy, we’re too critical to the EU not to arrive at a solution that fairly fits the interests of both sides, especially at a time of instability elsewhere. Business leaders want a practical Brexit. They can see the “win-win” solution. It’s now up to both our government and the governments of the other member states to deliver.

 

A version of this article first appeared in The Telegraph  https://www.telegraph.co.uk/business/2018/07/02/leaders-should-offer-businesses-practical-brexit/