22/11/2016
CBI president Paul Drechsler kicked off proceedings
yesterday, addressing "one thousand business leaders at the Grosvenor House Hotel".
On the need to mitigate economic uncertainty on Brexit, he said: "When it comes to negotiations, no-one understands the need for discretion better than business. We're not asking for a running commentary - but we are looking for clarity and â above all â a plan.
Drechsler conceded that there had been "encouraging signs". The Government, he said, "has set a deadline for triggering Article 50. It's given guarantees on EU funding programmes that have already been allocated. And it's offset uncertainty around Brexit with greater certainty on Heathrow and Hinkley Point".
"But in other areas", he complained, "uncertainty remains. Business needs to know we won't close our borders to Europe's talent, or lose our privileged access to Europe's markets". Then came the billion-dollar question: "what happens on the day after Brexit?"
"When the clock strikes midnight, and our two years' negotiating time is up? Today, businesses are inevitably considering the cliff edge scenario â a sudden and overnight transformation in trading conditions. If this happens, firms could find themselves stranded in a regulatory no man's land".
This is exactly the scenario
we've been positing, and it is all very well for critics to say that we can adjust, and that there are work-arounds.
But the issue Drechsler raises is "a sudden and overnight transformation in trading conditions". That is the cliff-edge scenario which, even if unlikely, could happen and is quite evidently giving industry nightmares.
"And even if our legal obligations are clear and in place there would also be real, practical implications", says Drechsler. "Our ports, airports and logistics firms, if faced with new trading rules, could suddenly need new and potentially complex paperwork, which would take more time and money to process".
"As a result", he says, "they'd need more warehouses to store more goods on-site, and more supply roads for the vehicles waiting to deliver them. At short notice â this would be impossible. So â for many firms it's not about a 'hard' or 'soft' Brexit, but a 'smooth' Brexit, which avoids these cliff edge problems".
Some actually welcome the idea of a "hard Brexit", and regard the prospect of massive disruption as an exaggeration â an extension of "project fear". But the reality of a "hard Brexit", as we understand it, is the Article 50 talks yielding no agreement â for whatever reasons â precipitating the UK into a "WTO option" scenario.
Those who then talk about the EU "not daring" to raise barriers to trade simply do not know what they are talking about. Those barriers already exist. We are inside the fortress, trading freely with our EEA partners. By adopting the WTO option, we would voluntarily place ourselves outside the fortress. As a unilateral move, it is something we would do to ourselves.
But, the 1000-strong gathering was expecting clarity they didn't get it. All they got from the Prime Minister was: "Obviously, as we look at the negotiation we want to get the arrangement that is going to work best for the UK and the arrangement that is going to work best for business in the UK".
She then went on: "And Iâm conscious that there will be issues that will need to be looked at", adding: "I understand the point that Paul [Drechsler] has made. Others have made this point, that people don't want a cliff edge, they want to know with some certainty how things are going to go forward". But, to conclude, all she could offer was: "That will be part of the work that we do in terms of the negotiation that we are undertaking with the European Union".
Starved of anything more substantive, however, the media have gone into overdrive with the idea that Mrs May was hinting at a "
transitional deal".
The demand for a transitional deal has arisen, says the
Guardian "because there is a severe mismatch between the two timetables that will apply when the government negotiates Brexit". Triggering article 50, it adds, "will lead to the UK leaving the EU after two years. But if the UK wants a free trade deal with the EU, as seems likely, negotiating that within two years is almost certain to prove impossible. Most experts believe this would easily take five years, or more".
To lend credence to the supposition, though, we had Mrs May's spokeswoman telling us yesterday that there is no question of the government seeking to extend the withdrawal negotiations beyond the two-year limit set out in article 50. "We will not be seeking to extend the article 50 process", she said.
It is that, more than Mrs May's comments, that effectively confirm that we are going for a transitional settlement.
As to the shape of that deal, the
Guardian rightly suggests that this would be a matter for negotiation, "but the assumption in the business community is that it would be an arrangement that preserved single market membership, akin to Britain remaining in the European Economic Area. Or the Norway option, as it was called during the EU referendum campaign".
This, says the newspaper, would allow businesses to carry on trading with the EU much as they do now, "but it would also require the UK to pay into the EU budget and British firms to comply with EU regulations" â thus demonstrating that, in five months, it has learned nothing.
It then guesses at a possible duration of such a deal, suggesting that: "it is quite possible that this could last for five years, meaning that the UK would not achieve full Brexit until perhaps 2024". For businesses, it concludes, that would be a relief. "But for hardline Brexiters who want to leave the EU quickly, this would look like a betrayal".
Even as they bleat, though, potentially dangerous moves are afoot to destablise Brexit. According the
Independent, Richard Branson's Virgin is to help bankroll a secret Blairite campaign to stop Brexit.
An email seen by the newspaper, we are told, highlights the scale of backing the group has already secured. It shows the campaign has been months in the planning and claims "substantial progress" has already been made, including the identification of "an excellent potential CEO".
The memo was written by Alan Milburn, who was one of Tony Blairâs closest Cabinet allies and reveals the group has heavy financial, political and corporate backing and is receiving advice and support from a host of high-level business and communications organisations.
High-profile MPs including former Deputy Prime Minister Nick Clegg and Labour MP Chuka Umunna are believed to have had contact with the group, as have celebrities such as Bob Geldof.
Freuds, a leading public relations agency that was founded by Matthew Freud, a close friend of both Mr Blair and David Cameron, is understood to have been commissioned to manage the strategy and marketing of the campaign.
To counter this new assault, the "hardline Brexiteers" need to up their game. Rather than bleating about "betrayal", they need to be pre-empting any of Mrs May's moves, and demanding to see he proposals for an end game.
It is all very well her talking (or just thinking) about a transitional deal, but someone has to ask why the CBI, having secured continued participation in the Single Market, will be keen to drop this in favour of a "free trade agreement" which will offer less access to European markets than we have now.
Longer term, what we are looking at is the possibility of each step away from the EU resulting in a deteriorating trade position. To regain the high ground, we need something inspiring, something better than we have now, otherwise the work of Branson and his pals might gain some traction.
And in this, one can be fairly certain that pushing for an economic catastrophe isn't the best option on the table.
