Mar 13, 2019
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"No way to run a country": business reacts to Brexit farce, MPs reject no-deal

Mar 13, 2019

Business groups on Wednesday signalled that they’re losing patience with UK politicians after the negotiated Brexit deal was voted down on the previous evening leaving confusion around Britain’s future trading options. And they’re unlikely to have any clarity as Thursday dawns with MPs on Wednesday evening voting to reject the idea of a no-deal exit altogether. The vote was non-binding but it nonetheless changed the landscape for the struggling British government.

Business is running out of patience with a UK government that seems unable to tell it what Brexit will actually mean in two weeks' or several months' time

Prime Minister Theresa May seems to have rejected what Parliament has voted for, saying that the “legal default remains we will leave without a deal unless something else is agreed,” although adding that “we could have a second referendum” and that MPs will get a vote on delaying Brexit later on Thursday. The suggestion from the PM is also that if MPs won’t approve her deal, the extension could be a long one.

While this may sometimes seem like a UK-specific issue, the country is the world's fifth largest economy and so any shock to its economic system will have an impact beyond its borders, which means Brexit matters globally.

As we said, the latest news is that MPs have rejected the no-deal option and while the government still wants to retain it as an option, what MPs said is essentially: “No deal? No way.”

So while the vote on Wednesday made no-deal less likely and the pound staged a mini recovery on the news, the vote has also extended the uncertainty around the whole issue of the UK leaving the EU. British business has its head in its hands as a tough environment is made even tougher by the inability to plan for a future that’s full of unknowns.

Helen Dickinson, chief executive of the British Retail Consortium, had earlier in the day said businesses are now “exasperated by the lack of clarity over their future trading arrangements.”

Stephen Phipson, chief executive of manufacturers’ group, Make UK, had added: “It is now essential that Parliament brings the curtain down on this farce,” adding that the risk of no-deal “would be disastrous for UK manufacturing, jeopardising many thousands of jobs in every constituency in the land.”

That risk has, on the surface, receded so it looks like the UK government’s brand new plan to turn Britain into an almost completely duty-free zone might end up being consigned to the dustbin.

On Wednesday morning the UK government had released its strategy to reduce tariffs to zero on most imports into the UK as part of a temporary plan to offset the risk of major price rises in the event of a no-deal.

However, while this might have been good news for consumers, there were fears that companies manufacturing and selling within the UK would be disadvantaged by a flood of cheap imports. Some industries would have been protected, such as farming, ceramics and car manufacturing, but most industries would have been competing in a fully tariff-free marketplace.

The government had called the new tariff rules a “modest liberalisation”, given that many UK imports are already tariff-free because of the country’s current membership of the EU. Yet it's ironic that some EU products that are currently tariff-free wouldn't be under the new rules.

But Carolyn Fairbairn, director-general of the Confederation of British Industry, said that the plan and the prospect of no-deal would be a “sledgehammer for the economy”.

She said the tariff-free strategy was “the biggest change in terms of trade this country has faced since the mid-19th century” and is “being imposed on this country with no consultation with business, no time to prepare. This is no way to run a country. What we potentially are going to see is this imposition of new terms of trade at the same time as business is blocked out of its closest trading partner.”

Whether the government truly expected to have to implement this new regime was open to question, as was so much else around the whole issue of Brexit, and some analysts interpreted the publication of the tariff info as yet another attempt to focus MP’s minds on the need to approve some kind of deal.

Well, it certainly did focus lawmakers’ minds, but perhaps not in the way the government wanted. 

And what about the electorate? Well, they won't have their say without a second referendum. Regardless of whether the electorate supports leaving the EU or remaining within it (with recent opinion polls suggesting a small majority for the latter option), the general approach does undermine the ruling Conservative party and its long held status as the party of business.

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