Egging on a ‘no deal’ outcome is the height of recklessness

Rachel Cunliffe
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Once we look at the nitty-gritty issues businesses are actually worried about, the argument for a stable transition deal becomes deafening (Source: Getty)

Theresa May has stuck to her line that “no deal is better than a bad deal”, while David Davis seems almost flippant about the prospect of walking away from the Brexit negotiating table.

In recent weeks, it has begun to feel as though “crashing out” of the EU is both inevitable and – for some – desirable.

That sentiment has appeared in these pages too. On Wednesday, Brian Monteith wrote that there is no “cliff edge” for British businesses, only cliff tops to scale, while yesterday Graeme Leach offered 10 reasons to be optimistic about a no deal outcome.

Read more: 10 reasons the UK should not fear a ‘no deal’ Brexit outcome

Positivity is helpful to some extent, but there is a certain blase confidence on display that is masking the highly distressing reality facing British businesses today.

On Monday, five business lobbies, from the Confederation of British Industry to the Federation of Small Businesses, wrote an open letter to Davis, urging the government to prioritise a transition deal.

Between them, these groups represent hundreds of thousands of businesses and millions of employees. They encompass the entire spectrum of British industry, from multinational giants to startups, manufacturing and agriculture to high tech and services. And all of them are united in their concern for British jobs and investment, if a transition deal is not finalised.

That is a message we ignore at our peril.

One of the sticking points appears to be a misunderstanding of what a transition deal actually is. There has been outcry among Brexiteers, for example, that a deal on the same or similar terms to the status quo would effectively be keeping the UK in the EU for an additional two years, with many of the very costs and regulations that they fought so hard against in the referendum campaign.

This is true. A transition period which allows businesses on both sides of the Channel to continue trading as before would naturally be, in practice, a lot like staying in the EU.

The key difference is that it would be finite.

Yes, for a period Britain would still have to contribute to the EU budget. Yes, the EU courts would still have some jurisdiction. And yes, we might have to postpone signing a flurry of new trade agreements (although trade deals tend to take years to hammer out anyway, so some extra time would actually be quite useful).

But these are temporary measures, and their continuation would ease the present panic and provide much-needed breathing room to prepare for the future.

That’s not a secret plan to stay in the EU permanently or water down Brexit. It’s a plan to ensure Brexit happens in a responsible and diligent way.

Once we get away from the ideology of what “leaving the EU” means, and look at the nitty-gritty issues businesses are actually worried about, the argument for a stable transition deal becomes deafening.

Will exporters be able to sell their goods on the continent on the same terms? Will they need to pay tariffs that eat away at their profit margins, and if so, will those tariffs be applicable every time goods cross a border?

Will customs processes disrupt supply chains, increasing bureaucracy and potentially devastating perishable goods? Will manufacturers be able to get the parts they need to make their products?

Will firms with a large number of EU workers be allowed to continue employing them, or must they all leave by 29 March 2019?

What happens to firms with offices in EU countries? Will goods or services currently being traded be deemed non-compliant with EU regulations overnight?

The UK is a world leader in financial services, with over a million jobs and 11.5 per cent of total tax receipts linked to the sector. What happens if the EU tries to introduce a host of banking regulations and rules on euro clearing to try to handicap the City? Isn’t it worth at least trying to avoid this outcome?

These are not trivial issues, and nor can they be waved away with the magic wand of “free trade”. Free trade deals take work and energy, and in the meantime, millions of people’s livelihoods are at risk. Rousing rhetoric about scaling cliffs won’t help struggling firms that are now being forced to make impossible decisions about an unknown future.

It is not enough to promise that everything will be resolved in a decade, and that the UK will be better off for it. These are problems that businesses started thinking about 18 months ago, and now the government must catch up.

A no deal outcome may turn out be the only option, and the UK must be ready for it, but it is reckless to be urging the talks to break down for the sake of obtaining sovereignty a couple of years earlier.

And if we end up with a compromise deal that means accepting EU rules for just a little longer, to give our businesses time to prepare, that is without doubt a price worth paying.

Read more: Lack of transitional deal will damage thousands of European manufacturers

City A.M.'s opinion pages are a place for thought-provoking views and debate. These views are not necessarily shared by City A.M.

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