A government spokesman has “categorically” stated that the UK will leave the customs union with the European Union when the Brexit process is complete.

British business leaders react

The statement by a Downing Street spokesman has caused consternation among British business leaders although government sources have said privately that ministers hope to achieve a “customs arrangement” based on free trade with the EU.Intended to heal divisions within the Cabinet over the government’s negotiating position, the statement came at the start of a week when Prime Minister Theresa May and Brexit Secretary David Davis prepared to hold talks with the EU’s chief negotiator Michel Barnier on transitional arrangements.The talks in Downing Street are likely to focus on an insistence by Brussels that EU law must continue to apply to the UK throughout the transition period, which is expected to last about two years, and demands that EU citizens who come to UK during the transition should enjoy the same rights as those who arrived before the Brexit date of March 29 next year – something Mrs May has set her face against.

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Customs union membership ruled out

Britain has ruled out continued membership of the customs union as it would prevent the government from pursuing new free trade arrangements with nations outside the European Economic Area.Hilary Benn, the Labour MP who chairs the Commons’ Exiting the EU Committee, said that ruling out any continued membership of the customs union was “a profound mistake”.He told BBC Radio 4’s Today programme that the move would both harm the economy and risk conflict in Northern Ireland over the border with the Republic of Ireland.“I wish (Downing Street’s statement) was clarity but I don’t think it is,” Mr Benn said. “I think the government is in a state of open disagreement. The prime minister has been immobilised. We’re 19 months since the referendum and we still don’t know what it is we want.“This is a very serious moment for our country. I think it’s a profound mistake to leave a customs union with the European Union.” He said that leaving the customs union would involve a return to some sort of checks on the Irish border, which, in turn, could jeopardise the peace process. More widely, he added, the decision could cause massive uncertainty for businesses.

Transitional agreement between the UK and EU

Adam Marshall, director-general of the British Chambers of Commerce, said, “An overwhelming majority of our businesses, large and small, want a standstill transition agreed by the UK and the EU without further delay. “UK businesses and their European trading partners expect the negotiators to deliver a clear sense of what the future trading relationship will look like, and a sensible transition that gives them both immediate certainty and adequate time to prepare for future changes to the trade rulebook.“A key transition priority is to ensure that UK exporters and importers maintain the same terms of trade with those countries currently covered by EU free trade agreements, for the length of the transition. The onus will then be on the UK government to secure the benefits of these agreements for the future.” On the UK’s ability to negotiate new trade deals during a transition period, Mr Marshall added, “While our businesses want the UK government to explore new and upgraded trading relationships around the world, their most important priority is to secure the significant levels of market access British businesses may lose, rather than the unproven potential of new agreements elsewhere. In the immediate future, effort must not be deflected from guaranteeing the benefits of existing trade deals for a symbolic and rushed ‘quick win’ elsewhere.” 

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Read more about the future of UK business in the Winter issue of our magazine 

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