CBI Reiterates Warnings On “No Deal” Brexit

Theresa May is due to resign as leader of the Conservative Party on Friday. Already, 13 Tory MPs, of varying shades of fame, have announced their intentions to run for the party leader post and become the UK’s next PM. It is understood that more nominations might be received before the deadline.

Candidates are setting out their stalls as to the direction that the party would take under their guidance, but the dominant theme is Brexit, of course. Despite the EU being adamant that the deal negotiated with May is the only possible deal and that negotiations have ended (indeed, the negotiating team has been dismantled), candidates are keen to frame how they will take a different line than May did and magically avoid the need for the backstop agreement for the island of Ireland – although this is never spelled out in any detail. Several of them (notably front runner Boris Johnson) have ruled out asking the EU for a further extension of the A50 notice period when it expires at the end of October, vowing to “crash out” of the EU with no deal and, consequently, no transitional period unless their solution is accepted. Needless to say, this gives steadier heads within and without the Conservative Party grave concerns.

The Conservatives have long prided themselves as “the party of business”, but lately they appear deaf to the concerns it expresses. Undaunted, the head of the Confederation of British Industry (CBI), Carolyn Fairbairn, has written to the candidates about the risks of a “no deal” outcome and gone on national radio to get the message out.

The CBI letter notes: “Firms large and small are clear that leaving the EU with a deal is the best way forward. Short-term disruption and long-term damage to British competitiveness will be severe if we leave without one. The vast majority of firms can never be prepared for no-deal, particularly our [small and medium-sized] members who cannot afford complex and costly contingency plans."

On BBC Radio 4’s Today programme, Fairbairn said of the idea floated by some in parliament that British industry was ready for a “no deal” exit: "this idea that we are ready is just not true". How can you be prepared for £20bn of increased customs costs? How can be you prepared for tariffs rising overnight? 150,000 businesses with no systems in place to do deal with this. This is not a responsible strategy for a government to have." She went on to state that the government shouldn’t even be considering a “no deal” outcome.

However, to woo ERG members and those MPs firmly on the Eurosceptic wing of the party, candidates think they must sound tough on Brexit. The contest will continue amongst MPs until only two of the candidates are left in the contest following a series of votes which will eliminate candidates with lower levels of support. The final two candidates will be presented to party members for a final choice – it is the case that many of these members favour a “no deal” exit: not a view shared by the general public, however. Of the 13 declared candidates, only three are saying that a “no deal” outcome must be avoided – none of them are (currently) expected to survive to the final two.

The current Foreign Secretary, Jeremy Hunt, is a candidate in the race. He has said both that he would reluctantly embrace a “no deal” exit and that doing so would be “electoral suicide” as he believes it would trigger a general election that his party (presumably under him) would lose. Rock, meet hard place.