European business issues stark warning on "zero sum" Brexit game

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Governments on both sides are ignoring business, says COBCOE (Source: Getty)

European businesses have issued a stark warning to governments both sides of the table that they are playing with fire over the "zero sum" approach to Brexit.

The Council of British Chambers of Commerce in Europe (COBCOE) claims Brexit negotiators are "not listening", urging teams both in London and Brussels to give "clear signals... that will allow them to plan".

"Uncertainty about the process and outcome of Brexit negotiations, coupled with a potentially short timeframe for change, is already impacting investment and commercial decisions," COBCOE's report said. "Managing the risk that this uncertainty presents is also a drag on productivity, while wider policy progress, such as development of the digital economy, could be delayed by the focus on Brexit."

David Thomas, executive chairman of COBCOE, said: “The negotiators’ apparent ‘zero sum’ approach, whereby a loss to one side means a gain for the other, does not reflect reality. The risks and uncertainties that firms across Europe now face undermine European productivity and competitiveness. Agreement on the future framework for economic relations between the EU and agreement on a plan for a transitional period must be made without delay.”

The body will present its findings to the Department for Exiting the European Union (DexEU) and the European Commision this month. It will also launch the report in London on 25 September.   

Some of the concerns uncovered are fears about the UK being partitioned off – even among European companies not directly engaged in trade with the UK - because of the country's position as a "gateway for international investment".   

Charles Brasted, Partner at research partner Hogan Lovells, said: “The European business community feels that the importance of the economy is being overlooked by those leading the negotiations and they are concerned that the mandate afforded to the negotiators by the European Council, effectively prohibiting meaningful discussions about trade until ‘sufficient progress’ is made on other political priorities, has increased uncertainty.”

“European businesses recognise that they have to work with the process that Brexit has begun and that some change will be needed to give effect to it; but they need, as a matter of urgency, a predictable framework within which to continue to operate, plan, grow and compete during that period of change, and beyond. Agreement on a plan for the transitional period should not be delayed any longer, so that businesses have as much time and information as possible to plan and implement contingencies effectively and can avoid making costly adjustments that prove unnecessary in hindsight.”

COBCOE's call for urgent clarity over transition comes as the City issued yet another plea for the government to set out its position on financial services. At his Mansion House speech last night, chancellor Philip Hammond gave the clearest indication yet of Number 10's direction of travel - although it is still light on detail.

There is also growing pressure on Prime MInister Theresa May to "break the impasse" with a "deal friendly" speech to the EU27 leaders on 22 September.