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Brexit, Symbol of the Referendum UK vs EU
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Business reacts to May’s Brexit plans

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17th Jan 2017
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Prime Minister Theresa May has announced that the UK will not remain within the EU single market or customs union in its current form when it leaves the EU.

In a speech setting out the UK’s objectives for the forthcoming Brexit negotiations May said that the UK "cannot possibly" remain within the European single market, as staying in it would mean "not leaving the EU at all".

Speaking to foreign ministers, MPs and members of the press in London the prime minister did promise to “push for the fairest possible trade deal” with EU countries and to negotiate new trade deals with non-EU nations.

The main points from the speech included:

  • Parliament will vote on the final deal agreed between the UK and the EU.
  • The UK will leave the European single market: as the basic tenets of the single market allow the free movement of goods, services and workers between its members, the UK had to either accept these or leave.
  • The UK will leave the EU customs union to either seek a new customs agreement or become an “associate member”, attempting to pick and choose deals.
  • An end or significant cuts to what the Prime Minister called “vast” EU budget contributions. Payments could continue to be made on a case-by-case basis.
  • There will be a “phased process of implementation” to avoid a “disruptive cliff edge”, but no reference was made to how long this period would be.
  • To maintain the medium-term regulatory framework current EU law will be incorporated into UK law then repealed by the UK parliament.
  • May repeated Chancellor Philip Hammond’s statement that Britain would have “the freedom to set competitive tax rates”.
  • The UK will walk away from negotiations if the EU seeks to punish it through reduced terms: “no deal for Britain is better than a bad deal”, said May.

As the points rolled, accountants and businesses began to react, with opinions varying from ‘bold’ and ‘ambitious’ to ‘muddled’ and ‘worrying’.

Mike Cherry, national chairman at the Federation of Small Businesses, called the Prime Minister’s speech a “starting point for a 'pro-business Brexit”, but demanded “concerted action” to address trade, talent and transitional arrangements.

“93 per cent of our exporting members export directly to the single market”, said Cherry. “Our members want to see this bold and ambitious Free Trade Agreement (FTA) so that they can continue to trade and operate within European markets.”

The British Chamber of Commerce offered a more pragmatic reaction to May’s announcements. “In business, what you achieve in a negotiation - not what you bid for - is what really matters,” said BCC’s director general Adam Marshall.

“While businesses now have a clearer sense of the prime minister’s top-line priorities,” said Marshall, “they will come away from her speech knowing little more about the likely outcome of the Brexit negotiations than they did yesterday.”

CEO and co-founder of international money transfer company Xendpay Paresh Davdra told our sister site BusinessZone: “If we’re unable to maintain access to the single market, we won’t be able to passport into Europe which is a big issue for us. We’re still hoping the UK has access to passporting. If it doesn’t, we’ll need to look at passporting from another EU country.”

Sam Bowman, Executive Director of the Adam Smith Institute, felt the speech struck “a welcome and surprisingly balanced tone”, emphasising the need for a deep, comprehensive deal with the European Union that removes tariff, regulatory and customs barriers to trade between the UK and the EU.

Reacting to the Prime Minister’s line on competitive tax rates for the UK, ActionAid Head of Advocacy Charlie Matthews said: “While it is great to hear the Prime Minister say she wants the UK to be a global nation respected around the world, her threat to turn the UK into a tax haven if negotiations with the EU do not go well, undermines this aim.

"Undercutting other countries’ tax rates would not only damage the UK’s global standing and reputation, but would spark a race to the bottom.”

What is the single market and customs union?

As shown on a recent Any Answers post, during discussions of Brexit some confusion over the precise definitions of the single market and the EU customs union has arisen.

A customs union is a type of free-trade area. Two or more countries agree to eliminate mutual trade restrictions, and establish a common system of tariffs and/or quotas for non-members. The big disadvantage of this is that customs union members are not allowed to negotiate their own trade deals with other countries.

The single market is also a type of free-trade area, but souped up to include the free movement of services, investment and people, as well as goods. Such agreements need regulations to be harmonised across the market – hence the heavily criticised rules on items such as vacuum cleaners across the EU.

Without such regulations in place, however, there is a fear that safety would be comprised by unscrupulous operators looking to manufacture the cheapest possible goods. This also clarifies why the EU single market offers free movement of people, as it makes allowances for the exchange of typically non-tradable goods, e.g. plumbing.

Brexit timetable

  • 17 January: Theresa May sets out her objectives for leaving the EU
  • End of January 2017: The Supreme Court ruling on consulting parliament is due, but this has been trumped by the PM’s announcement that she will call a vote in both houses on the final plans to leave. The vote is unlikely to affect things as Labour has stated it will not block the triggering of Article 50 (although it may table amendments).
  • February 2017: David Davies’ Brexit department has stated that it will publish a whitepaper containing more detail.
  • End of March 2017: Article 50 must be triggered and the formal Brexit negotiation process started, as set out by Theresa May in October.
  • March 2019: The UK then has two years to negotiate a deal to leave the EU. However some EU countries are calling for negotiations to only last 18 months to give time for their governments to ratify whatever deal emerges.

Replies (2)

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Sarah Douglas - HouseTree Business Ltd
By sarah douglas
20th Jan 2017 09:05

The silence about Brexit is deafening.

So after been through 2 referendums I feel the EU referendum as divided UK deeply. The referendum ended up not just been about the EU but so many other issues.

Personally, I think it has got to the stage that people are silent. I had to keep quite on an occasion as I can honestly say I would have put a friend through a window. We have been friends for over 30 years, but I had to leave the room otherwise a huge argument would have happened and it was not the time nor place. Yes, everyone is entitled to their opinion. The simple fact is it was not a huge majority.

Unfortunately, I think there is big trouble brewing ahead in Northern Ireland. I don,t see how you can control your borders without putting a solid border between the Republic of Ireland. Just read the papers and see how the tone is going. It is back to the days before the peace agreement.

I accept the referendum decision, but I feel this referendum has hurt this country badly regarding everyone getting on. Unless the winners stop with the attitude, you remainers shut up you lost. They kept going for over 20 years; they did not shut up or give up. It is called democracy. The fact is calling people losers who are your own population is not going to achieve anything. It is time everyone was nice to each other. For me it is up to the winners to show why they believe they were right. They need to behave in a professional manner, which does not involve slaging Europe off or other countries even if other nations do it, the Uk needs to lead by example.

Leaving Europe should not mean the UK becoming USA lapdog, Remember the UK voted to come out of Europe so to simply walk straight into Donald Trump's lap like a dog with a wagging tale is embarrassing.

Thanks (1)
Replying to sarah douglas:
avatar
By Knight Rider
07th Feb 2017 17:42

Some people regard Tony Blair as the US lapdog. Whatever your opinion of Mr Trump it is important that we engage with the US administration which is likely to treat the UK more favourably than Obama. The US is the UK's largest inward investor and the UK's largest export market.

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