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Brexit - Press releases

Avoiding trade ‘cliff-edge’ is Brexit priority for business

21 Feb 2017

Union Jack flag between other EU flagsIoD calls for Government to allow necessary time for UK-EU trade deal, and asks politicians to rule out second referendum

The Institute of Directors today called on the Government to ensure there is no vacuum between the UK agreeing withdrawal terms with the EU and the enactment of a new trade deal. The two year countdown that will begin when the Prime Minister triggers Article 50 may not be long enough to negotiate both the exit deal and a free trade agreement (FTA), the IoD said, urging the Government to seek an early accord with the EU that talks could be extended for one to two years, if necessary. A majority of IoD members say the final deal is the most pressing concern in the upcoming negotiations, with only 17% saying it is how long negotiations take.

In a major new report, Navigating Brexit, the IoD puts forward proposals for ensuring a smooth and orderly exit from the EU, an imperative for its members given their extensive links with the bloc. The alternative to signing a FTA before leaving the EU is for the UK to abruptly fall back on World Trade Organisation rules to buy and sell with the our former partners on the Continent, which the IoD says is a poor substitute for the current level of market access. The business organisation has, however, told members to prepare as best as possible for the ‘cliff-edge’ scenario in which no trade deal is agreed.

In order to reduce economic uncertainty, and chart a clear and smooth course toward Brexit, the business group asked for a commitment from politicians on all sides  to rule out a second referendum on EU membership in the next Parliament.

In the report, the IoD also called for the Government to:

  • immediately guarantee that the 3 million EU citizens living in the UK will be able to stay after Brexit, in order to reduce on-going uncertainty for employers and employees – 40% of IoD members employ EU nationals
  • implement any arrangement with the EU on fundamental questions such as Single Market membership  evenly across sectors and parts of the UK
  • minimise potential customs delays by setting up a joint customs cooperation committee with the EU
  • consider re-joining the European Free Trade Association, which would not prevent the UK from signing trade deals outside Europe
  • prioritise regulatory stability for businesses in the Great Repeal Bill, with any changes in the short-term to kept to a minimum
  • pursue some quick-wins on areas of on-going co-operation, such as participation in the EU’s Horizon 2020 programme and the Erasmus scheme

Stephen Martin, Director General at the Institute of Directors, said:

“British businesses want to make Brexit work, and are keen to explore trade opportunities with the rest of the world that arise once we leave the EU. But the first priority must be ensuring the exit process is a smooth as possible. The means avoiding a vacuum between the withdrawal agreement being settled and a new trade deal with the EU coming into effect. Companies have remained resilient over the last few months and will do everything they can to maintain investment and hiring plans when Brexit negotiations get underway. On its side, the Government must maintain business confidence through consistent communication that they are working to avoid a ‘cliff-edge’ scenario, where the UK has to fall back on WTO rules for trading with the EU. 

“The next few years will no doubt see plenty of political twists and turns along the way, but the Government’s overriding goal must be establishing a positive future trading relationship with the EU. The terms of the deal are much more important than whether it is agreed in the two years after Article 50 is triggered. We want to see a clear course plotted towards the open and outward-looking vision of Britain that was promised in the referendum campaign, and that means we don’t want to turn back halfway. Businesses want as much stability and certainty as possible, so we call on politicians of all parties to agree that there will be no second EU referendum in the next Parliament.”

Allie Renison, Head of EU and Trade Policy, and author of the report, added:

“While there are challenges arising from exiting the EU, they can be tackled if all sides approach Brexit in a constructive manner. The IoD is doing its bit to provide a range of different possible solutions to these challenges, which must be dealt with smoothly in order to make a success of Brexit for business. Both sides must remember that we are starting from common position, so a preferential agreement on trade and labour mobility that reflects these links is essential. Brexit is not just about a divorce, but setting a new framework for partnership and cooperation.

“The Government must work towards a good trade deal with the EU, but business have to be prepared for all eventualities, including that we leave the EU with no deal signed. We urge all members to begin assessing their degree of exposure to Brexit, undertaking discussions with clients, customers and suppliers about how to maintain and strengthen trade links during this process and beyond.”

Navigating Brexit full report

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