Business backs Philip Hammond's vision for a transitional deal

Helen Cahill
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Theresa May Attends Prime Minister's Questions
Hammond wants to give certainty to businesses (Source: Getty)

Business leaders have thrown their weight behind a Brexit transitional deal which mirrors the vision set out by chancellor Philip Hammond.

In a report today, the Institute of Directors (IoD) outlined options for the transition that it said will minimise disruption to businesses at the UK leaves the EU.

Read more: Soft Brexit? Chancellor claims big support for a transitional deal

Allie Renison, the IoD's head of EU and trade policy, argues the UK will not be able to finalise a trade agreement with the EU in two years because "Brussels and hard deadlines do not always mix well".

Instead, the UK must choose between a range of options to ease the path for business that will also limit its ability to finalise full trade deals with other nations, she said.

These options include extending the Article 50 deadline, negotiating an agreement to stay in the European Economic Area (EEA), or implementing a series of measures to replicate customs arrangements or the relevant parts of EU law.

Read more: Brexit transition deal important to avoid economic harm says Mark Carney

Hammond has advocated a transitional period that maintains strong ties with the EU, to allow businesses time to adjust as the UK moves towards its new relationship with the bloc.

However, some cabinet colleagues such as Brexit secretary David Davis are confident the UK will have agreed its future trading relationship with the EU by March 2019, and that any adjustment period should only involve the implementation of the new rules.

Miles Celic from TheCityUK said an agreement on a transitional deal "is the most immediate and urgent priority for the UK-based financial and related professional services industry"

He warned: "Firms are already spending money and reluctantly starting to activate contingency plans."

Catherine McGuinness, policy chairman at the City of London Corporation, said the Square Mile needed answers by the autumn, and supported a version of the transition that allowed firms to keep their access to the European market.

“EEA membership, which would give market access, should be seriously considered," she said.

"However, different businesses will clearly have different requirements for what this actually means to them and any arrangement needs to cover new as well as existing businesses.”

But Shanker Singham, director of economic policy at the Legatum Institute, said the UK needed to execute a new EU trade deal and new regulations immediately after Brexit.

"If we don't, all we will be doing is minimising the disruption," he said.

Read more: Brexit talks will get "into the substance of the matter" this week

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