Theresa May would need to secure a clear Brexit transition agreement by March if she wanted to avoid a “snowballing” number of companies activating contingency plans and even moving operations out of the UK, the Institute of Directors will warn.
Stephen Martin, director general of the business group, is to issue the ultimatum to the government at the IoD annual dinner on Tuesday, saying “all we want for Christmas is progress on Brexit”.
He will say the time would come soon when the IoD may have to advise all of its members to be ready for no deal and urged the government to stop this outcome.
“We know from our recent surveys that over half of you are already in the process of contingency planning,” Martin will say. “The number of businesses who have actually implemented these plans is currently low, around one in 10, but this will snowball if we don’t find out soon what is going to happen in March 2019.
“It’s clear that the government has a small window of opportunity between now and the end of the first quarter of next year to secure a firm political agreement on transition. If we don’t have this commitment by the end of March, then business will come under pressure to implement contingency plans, even perhaps as far as relocating operations.”
He will say companies supported the idea of a transitional period after March 2019 to help the UK and rest of the EU adjust to Brexit, but they needed to know that cross-border trade would effectively remain unchanged.
Martin will say that businesses do not want to move to World Trade Organisation rules as it would be a “huge drop down from where we are now” but may soon have to start planning for that possibility.
“WTO is not the simple option, it would involve massive complexity to adjust our customs procedures, and we would lose not just our level of access to the single market, but also potentially all of the trade and investment agreements we have with other countries through the EU,” he will say.
“It’s not desirable, but it is possible. The time may come soon when we have to advise all of our members to be ready for no deal. We plead with the government that it does not get to this stage.”
Warnings by business groups have been intensifying in recent weeks amid worries that May’s improved offer of up to £40bn would not be enough to break the deadlock and allow the EU to move on to trade talks at the December council.
Britain’s aerospace exporters warned parliament on Monday of a crippling £1.5bn-a-year headwind if ministers failed to agree urgent new customs and regulatory deals with the EU.
And last month, five of the UK’s biggest business lobby groups, including the IoD, said that time was running out for the government to strike a transition deal before firms started to rein in spending plans as they finalised budgets for 2018.
“We need agreement of transitional arrangements as soon as possible, as without urgent agreement many companies have serious decisions about investment and contingency plans to take at the start of 2018,” the business groups wrote.
“Failure to agree a transition period of at least two years could have wide-reaching and damaging consequences for investment and trade, as firms review their investment plans and business strategies.”
The CBI and British Chambers of Commerce were among the other signatories warning the government of the potentially dire consequences for the UK economy of failing to agree a transition period of at least two years with the EU. The bosses of the manufacturing trade body EEF and the Federation of Small Businesses also signed the letter on behalf of their members, who employ millions of UK workers.
This article was written by Rowena Mason Deputy political editor, for theguardian.com on Tuesday 21st November 2017 13.08 Europe/Londonguardian.co.uk © Guardian News and Media Limited 2010