IoD calls for partial customs union deal with EU

Britain should try to strike a deal on a partial customs union with the European Union once it leaves the bloc in March 2019, the Institute of Directors said.

The agreement would cover industrial and processed agricultural goods and remove the need for UK manufacturing firms to meet ‘rules of origin’.

These rules, if maintained, could render a tariff-free deal “meaningless for many companies in these sectors”, the IoD said.

The IoD urged the UK and EU to focus on “outcomes, not process”.

“At the same time, it would allow the UK the freedom to forge its own trade policy and seek free trade deals with other countries in areas not covered – meaning we could remove tariffs on raw agricultural products from the world’s poorest countries,” it added.

The customs union allows tariff-free passage of goods between members.

A customs union similar to Turkey’s agreement with the EU could be used as a base to build a broader free trade agreement, the IoD report said.In its report, the IoD said its suggestion would allow the UK to forge its own trade agreements alongside EU negotiations.

It would also allow the UK to maintain full control over agricultural tariffs, said the business group.

IoD director general Stephen Martin said the UK’s decision to leave the EU means that leaving the customs union was less a matter of choice “but rather one of necessity”.

“For the welfare of Britain’s businesses, prolonging its operational effects during the transitional period is no doubt crucial,” he said.

“In the long term, the UK should consider remaining in a narrowed customs union to mitigate the disruptive effects for business and ensure manufacturing remains competitive and attractive for inward investment.”

In a separate announcement, the City lobby group UK Finance responded to reports that the government was preparing to back a framework for financial services trade after Brexit based on 'mutual recognition'.

UK Finance chief executive Stephen Jones said including an ambitious framework for trade in financial services in any future agreement "is in the interests of both sides".

“Through mutual recognition, closely aligned standards and supervisory cooperation, we can preserve some of the benefits of market access without sacrificing regulatory autonomy,” he said.