Post-Brexit reversion to WTO rules 'will hurt UK and EU companies'
For the UK to quit the European Union without a trade deal and reverting to World Trade Organisation (WTO) rules will open a Pandora's Box of economic consequences, hurting companies on both sides of the Channel, the Confederation of British Industry (CBI) has warned.
"The UK would face tariffs on 90% of its EU exports by value and a raft of new regulatory hurdles," said CBI president Paul Drechsler in notes for a speech to be given on Thursday night to the Lord Mayor’s Mansion House business and investment dinner.
"Let's remember these barriers would hurt firms on both sides of the Channel," he said, referring to a Brexit that saw UK revert to WTO rules. "A 'no deal' scenario would open a Pandora's Box of economic consequences."
UK Prime Minister Theresa May is expected to trigger Article 50 of the Lisbon Treaty in March, starting a two-year countdown to Britain's exit from the EU. This was the result of the Brexit vote last year, which has polarised the country along remain and exit lines. It has also seen sterling plumb embarrassing depths against a raft of other currencies, sending inflation higher.
May's Brexit plans have run into public criticism this week from a trinity of generally well-regarded Tory icons, underscoring the acrimonious mood within the party, which appeared fractured along Bremain and Brexit battle lines.
Among the critics were former Chancellor George Osborne, Lord Heseltine and former PM Sir John Major. Sir John said the probability of no agreement being reached between the UK and EU was very high.
"I have watched with growing concern as the British people have been led to expect a future that seems to be unreal and over-optimistic," said Major earlier in the week. "Obstacles are brushed aside as of no consequence, whilst opportunities are inflated beyond any reasonable expectation of delivery."
Osborne also warned earlier in the week that even trade deals with other countries around the world would not offset the loss of trade resulting from a so-called hard Brexit when leaving the EU.
"Let’s make sure that we go on doing trade with our biggest export market, otherwise withdrawing from the single market would be the biggest single act of protectionism in the history of United Kingdom," said Osborne.
Meanwhile, referring to Article 50 being triggered, Drechsler likened the circuitous path to date as a ride at a fun park.
"Right now, it feels like we're just reaching the top of the Article 50 rollercoaster. Any minute now, maybe next week, maybe the week after that we'll suddenly drop into the twists and turns of negotiations," he said in the speech notes.
Firms on both sides of the Channel have expressed worries about potential "worst-case scenario" outcome that saw UK take on WTO rules.
"Some (of those firms) are getting ready for it to reduce economic damage. Some won't prepare because they're hoping for a deal. But in reality many firms can't prepare because the cost of change is simply too high to even consider it."
While the CBI was hopeful of a Brexit deal being achieved, Drechsler said those parties that only wanted UK to quit the bloc without one as "not only wrong but irresponsible".
"Getting a 'smooth Brexit' which minimises disruption across the Continent is in everyone's interest. An ambitious, comprehensive deal covering every sector is what's best for Britain, it's what's best for Europe and we'll do everything we can to get it."