Hugo Dixon: Why companies must back a new referendum on Brexit

Business leaders should get off the fence and back a new Brexit referendum. After all, most companies accept that making it hard to do business with a market responsible for half our trade will be bad for the economy.

So a “people’s vote” that could lead to us staying in the EU market offers only upside compared to meekly quitting the bloc.

The situation is different from last winter when Theresa May was prime minister. Her proposed deal was miserable. But many businesses thought that a bird in the hand was worth two in the bush. They were scared that we would otherwise crash out of the EU.

They also feared that the choice in a referendum would have been between May’s deal and “no deal”. Or perhaps it would have been a three-way choice between the deal, “no deal” and staying in the EU - and they didn’t want to take their chances in such a lottery.

But the scenarios aren’t the same now. If Boris Johnson gets an agreement this week, the choice in a referendum would be between that deal and staying in the EU. There would be no reason to put “no deal” on the ballot paper. After all, if the man who brought us Brexit was championing a deal, hardly any MPs would argue for “no deal”. On the other hand, if Johnson doesn’t clinch a deal, a people’s vote has got to be better for business than the certainty of crashing out.

As things stand, the Prime Minister has a decent chance of reaching an agreement. But businesses shouldn’t kid themselves that this will be good for the economy. Even though a Johnson deal will be better than crashing out, it will be far worse than our current deal inside the EU; it will also be inferior to the one May negotiated.

Most attention has focussed on what will happen to Northern Ireland, which will get a soft Brexit. But Great Britain, which accounts for 97% of the population, will get an extremely hard one.

Gone will be May’s bare-bones customs union. As a result, our manufacturers’ supply lines will be gummed up. Gone too will be the commitment to a “level playing field” with the EU. As a result, the bloc won’t agree a deep free-trade agreement with us. We’ll be lucky to get zero tariffs, let alone sweep away the “non-tariff” barriers that are the main blocks to frictionless trade in the modern world.

Johnson also says he won’t extend the “transition” period, under which we keep full access to the EU’s market until the end of next year. We’re very unlikely to nail down even a simple free trade deal by then. So business will be on tenterhooks while we’ll approach another cliff edge in 14 months’ time.

Some will hope that the Prime Minister will change his tune once we’ve left the EU. Perhaps he will follow EU rules and ask for a longer transition even if it means paying the bloc extra money - especially if he wins a fat majority in an election and no longer has to rely on the votes of hardline Tory Brexiters.