Hugo Dixon: Industry has to push for an honest Brexit

Honest: Business should be clearer with Prime Minister Theresa May about its demands

Stefan Rousseau/PA

11 January 2018

Companies should stop being so shy about Brexit. Businesses know Theresa May is about to inflict huge damage on our economy. But, with few exceptions, they have kept their heads down.

It’s easy to see why. Many firms are consumer facing. Our retailers, phone companies and other big brands know that half their customers voted Leave in the referendum two years ago. These companies are scared that, if they sound the alarm, the Brexit press will write vicious articles accusing them of being “saboteurs” or “enemies of the people” and their business will suffer.

Many other firms — defence companies, outsourcing groups, consultants and utilities — do business with the government or are heavily regulated by it.

They are afraid that, if they criticise the prime minister’s policies, they will be punished.

True, the CBI and other trade groups have spoken about the need for a transitional period to cushion the blow when we quit the EU next year. But that’s not good enough.

Few businesses will campaign against Brexit, at least for now. But they could and should push for an honest Brexit.

For a start, they should say that the two-year “implementation phase” that May says she wants won’t do the trick.

It’s based on the lie that we will be able to clinch a spanking new free trade deal with the EU by March of next year and all that will then be required is to implement it.

This is bunkum.

We won’t even start the trade talks proper until next year.

They’ll then drag on for years.

After that, if we manage to cut a deal, it will need to go through a laborious ratification process in all the EU’s parliaments. Only then will we be ready to implement it.

The whole process could easily take five years and maybe much longer. So if the prime minister gets her two-year implementation phase, she will merely have shifted the cliff edge to 2021.

Industry needs to spell out that this means massively reduced access to the EU’s single market, which accounts for half our trade.

We’ll have to rely on the World Trade Organisation until we figure out a deal and that means tariffs and non-tariff barriers for our manufacturing and agriculture, and virtually no help for our world-beating services industries.

Industry won’t invest during the two-year interregnum, or during the multi-year hiatus after that. And all the while other European countries will lure our juiciest businesses— pharma, finance, creative industries, aerospace, cars and so forth — to their shores.

After explaining that a two-year transition won’t work, companies then need to show why the government’s policies mean that the eventual trading arrangements we get with the world will be far inferior to what we now have.

This is because the prime minister has decided to pull us out of both the EU’s single market and its customs union.

The first decision, combined with May’s plan to stop free movement of people, means the best free trade deal we can expect with the EU is something like what it already has with Canada.

We wouldn’t have tariffs. But, otherwise, the deal wouldn’t be a lot better than relying on the WTO. It would, for a start, do little for services that account for 80% of our economy.

Meanwhile, pulling out of the customs union will lead to border checks, gumming up manufacturers’ supply chains which criss-cross Europe. The official reason the prime minister wants to inflict this wound on the economy is so we are free to cut lots of other deals with the rest of the world.

But that’s nonsense too. Quitting the EU means we’ll immediately lose deals it already has with over 50 countries including Switzerland, South Korea and Canada.

We can, of course, plead with Donald Trump to give us a trade deal. Maybe the prime minister will arm-twist Prince Harry to invite the American president to his wedding to curry favour. But even if the US decides to do a deal, its economic clout means it can largely dictate the terms. The same goes for China.

Business needs to explain why this means that, even when we finally sort out our trading arrangements with the world, we won’t be as attractive a place to invest in, and we’ll be fighting the global war for talent with one hand tied behind our back.

As a result, we’ll be stuck in the slow lane of the world economy for as far as the eye can see.

If industry sets out these points clearly and unemotionally, we could end up with a less destructive Brexit than the one the Tories are hell-bent on. And if the voters listen, there’s even a chance that they’ll decide they don’t want Brexit at all and put pressure on politicians to stop the whole mad escapade.

Hugo Dixon is editor-in-chief of InFacts

Hugo Dixon: Industry has to push for an honest Brexit

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