After the momentous events in Parliament on the evening of Tuesday 4 December 2018, with the option of a ‘Plan B’ made easier by the Grieve amendment, Business for a People's Vote reiterates that May’s deal is bad for business. MPs need to be clear that neither is a so-called ‘Norway Plus’ deal a satisfactory alternative for business.
Business leaders are calling on MPs to reject the Prime Minister’s deal when it comes to a vote in Parliament next week. They also warn MPs not to get side-tracked by the Norway blind alley. Instead, they call on Parliament to prepare the way for a People’s Vote with an option to stay in the EU.
“We already have the best deal - staying in the EU. The UK led the way in creating the single market. It pushed for a strong competition policy that stops governments propping up bust businesses. It played a big role in cutting trade deals with the rest of the world and, as a result, the EU now has pacts with 90 countries including Japan and Canada," adds Former president of the CBI, Sir Mike Rake. “And let’s not forget free movement has been a huge boon to industry. The prime minister has talked about European citizens “‘jumping the queue’ and described anyone earning less than £30,000 a year as unskilled. Both those positions are deeply insulting. We need EU workers and for those who are worried about migration numbers it’s worth remembering that they also tend to circulate in and out or the UK and return home immigrants from outside the EU are far more likely to be permanent."
Although a majority of businesses back a People’s Vote, according to a YouGov survey, some have supported the government’s deal because they are afraid of leaving the EU with no deal. But the number of MPs who want this is tiny and, after the “Plan B” amendment passed by MPs on Tuesday, the chances of crashing out with no deal are small.
Some businesses are also backing the deal because they think it will lead to certainty. Business for a People’s Vote points out that the deal will actually mean more years of uncertainty because it only specifies the divorce settlement and the notorious “backstop”,
rather than the final destination.
As a result, business confidence will be crushed and investment, which has already slumped, will stay depressed.
“Business leaders are notoriously nervous about opposing the policy of government of the day," says Former City Minister, Lord Paul Myners. "Most I speak with can, at best, say the Prime Minister’s Brexit deal is 'a lot worse for our business than the current situation but at least we have a deal on the table’. But this deal won’t get past Parliament next week and at that point there will be no government policy to avoid upsetting. That will be the time, if not earlier, for business leaders to get off the fence and come out in favour of a People’s Vote with an option to stay in the EU.”
Why the government’s deal is bad for business
The government’s deal has multiple problems. The key ones for business are:
Huge uncertainty because it is a “deal in name only”. Apart from the transition and the backstop, nothing is determined about our future relationship. There will be years of dispute over whether to extend the transition, whether to enter the backstop and how to come out of it. The political wrangling will crush business confidence and investment.
• The backstop does nothing for digital services, financial services, air transport, road haulage, public procurement, free movement of capital or services in general. To get any deal in services, 40% of our trade with the EU, we will have to agree the EU’s demands to follow more rules and pay it money - all without a say.
• The backstop won’t give frictionless trade for manufacturing industry because there will still be regulatory checks at the borders. This will gum up our supply chains.
• The EU will be in an exceptionally strong negotiating position for the future deal because the backstop will largely protect its £95 billion trade surplus with us in goods, but do nothing for our £28 billion surplus in services. The backstop will also
kick in from end-2020, only two years away, unless we can come to terms. So we will again be under extreme time pressure to agree what the EU wants.
• The deal ends free movement of people, which is beneficial for business.
• We will have limited freedom to cut trade deals with the rest of the world - and other countries will have little interest in signing trade deals with us. 90 countries already have deals with the EU which would give them backdoor to the UK market without giving our firms reciprocal access. Other countries such as America and China will be more interested in doing a deal with the EU than with us, especially as that would give them backdoor access to our market too.
• We will have to follow the EU’s trade policies without a say. If it decided to put dumping duties on America or China, for example, we’d have to do so as well - even if it didn’t suit us. And the EU wouldn’t have to fight for our interests if our trading
partners bullied us.
“If we stay in the EU, we can help create a more vibrant European market," agrees Dotcom entrepreneur Martha Lane-Fox. "The EU already has initiatives to create a single market in digital services, capital markets and other services - all areas where the UK has a competitive advantage. And there are still big trade deals to do, notably with America, China and India. If we are round the table, we will be able to shape these deals.”
Why Norway Plus is bad for business
Some MPs are thinking of backing a “Norway Plus” deal, where we would stay in the single market and customs union permanently. Business for a People’s Vote points out that it is unlikely Parliament would agree such a loss of control.
But even if it did, such a deal would be unsustainable as Brexiters would immediately be agitating to rip it up and go for the hardest of hard Brexits. This too would crush business confidence and investment.
“Parking ourselves in the European Economic Area alongside Norway and tagging on a customs union with the EU as well is a blind alley. How could a proud country like the United Kingdom follow all the EU’s economic and trade rules without a vote?" argues Former CEO of Sainsbury’s Justin King. “It’s not even as if a Norway-style deal would suit business in the unlikely event that it could be sustained. Our competitors would be making the rules for all our industries. Could we really be sure they would have our interests at heart when we were no longer sitting round the table?”
Norway Plus involves full single market and customs union membership without a vote. Those who say it will not involve free movement, payments into the EU budget and commitments to something like the Common Agricultural Policy and Common Fisheries Policy are not being straight.
Quite apart from the fact that this would involve a massive loss of control, business has four specific concerns
- It is doubtful that such an arrangement would be politically sustainable. Brexiters would be immediately calling to rip it up.
- The ongoing political infighting would harm business confidence and crush investment. Our competitors would be making the rules for all our industries, including financial services. Could we really be sure they would have our interests at heart when we were no longer sitting round the table?
Depending on what form the customs union took, we might be automatically signedup to the EU’s trade deals with other countries even if we didn’t want them. Alternatively, we would be cut out of those deals but then other countries would have
backdoor access to the UK market while our firms wouldn’t have access to their markets. Either way, we would be at a competitive disadvantage.
- We would have to follow the EU’s trade policies without a say. If it decided to put dumping duties on America or China, for example, we’d have to do so as well - even if it didn’t suit us. And the EU wouldn’t have to fight for our interests if our trading partners bullied us.
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