No-deal Brexit would be ‘wrecking ball’ for UK economy, British industry chiefs warn

Home Economy No-deal Brexit would be ‘wrecking ball’ for UK economy, British industry chiefs warn
No-deal Brexit would be ‘wrecking ball’ for UK economy, British industry chiefs warn

The U.K.’s draft Brexit deal, causing such upset among the British political establishment, is not perfect but the country must avoid crashing out of the EU without a deal, the president of the influential Confederation of British Industry (CBI) said Monday.

“(The draft Brexit deal) is not perfect, we all know that,” John Allen told an annual conference of the CBI in London, “but we’re trying to reach a deal that respects the referendum result but limits the damage to our economy.”

“It opens a route to a long-term trade relationship,” he said, and avoids what he called “the nightmare scenario of a no-deal departure which would be a wrecking ball for our economy.”

Opening the CBI’s annual conference on Monday, Allen said the conference was taking place at a time when the political environment in the U.K. was changing “hour by hour.”

Allen’s comments come after a dramatic week in U.K. politics. Last week, it was announced that the U.K. and European Union had reached a draft agreement on Brexit.

Since then, the U.K.’s Prime Minister Theresa May has been trying to prevent an outright mutiny from both pro-Brexit ministers among her Cabinet (senior lawmakers) and the wider Conservative Party. There are many among both that don’t like the deal and say it keeps the U.K. tied to Europe economically and politically, although so far a vote of no-confidence and leadership challenge has not been announced.

The draft withdrawal agreement, which runs to 585 pages, envisages the U.K. and EU agreeing a trade deal by the end of 2020, during a 21-month transition period after Brexit takes place in March 2019.

If there is no trade agreement in this transition period (which could be extended), then a “backstop” could kick in. This would essentially mean that the U.K. stays within a temporary EU-U.K. “single customs territory” for a limited (but unspecified) amount of time.

The “backstop” is designed to prevent a hard border in Ireland, which no one wants to see but the concept has proved very controversial in Parliament with both Brexiteers and Remainers opposing the deal as it stands. That does not bode well for May being able to get a majority of Parliament to approve the draft deal when a vote is held, likely to be in December.

Over the last few days, the prime minister has staunchly defended the draft agreement and insisted that it was not the finished product. Speaking to Sky News on Sunday, May said any change of leadership would only delay Brexit.

Also speaking at the CBI conference, its Director-General Carolyn Fairbairn said that while Westminster was engulfed by Brexit, money was flooding out of U.K. businesses, damaging productivity and the wider economy.

She said she had heard from hundreds of British firms that now was not a time to go backwards, although she said the draft deal on offer was “significantly” better than a no-deal Brexit.

“Business would have liked more certainty about frictionless trade in the future but the crucial thing it does is take that cliff-edge away, it takes that no-deal (scenario) away. It isn’t perfect but it is a compromise and this is a time when we have to compromise,” she said.