Prime Minister Theresa May acknowledged calls from British business leaders to avoid a “cliff edge” in which the U.K. leaves the European Union before sealing a fresh trade deal, signaling she may be open to seeking a transitional agreement to bridge any gap.
“We want to get the arrangement that is going to work best for the U.K. and that will work best for business in the U.K.,” May told the Confederation of British Industry’s annual conference in London on Monday. “I understand that people don’t want a cliff edge.”
The CBI urged the government to clarify what happens on the day after Brexit amid concern companies could be hit by uncertainty, new regulations and tariffs if a new relationship hasn’t been arranged with the EU by then.
“Businesses are inevitably considering the cliff-edge scenario — a sudden and overnight transformation in trading conditions,” Paul Drechsler, the president of the group, said before May spoke. “If this happens, firms could find themselves stranded in a regulatory no man’s land.”
May has said she wants to invoke Article 50 of the EU’s Lisbon Treaty by the end of March 2017, setting in motion two years of formal talks on the U.K.’s departure from the bloc. In that time, the government will have to draw up new rules for a range of economic activities currently governed by EU regulations as well as strike new trade deals. If no agreements are reached, trade between the U.K. and the EU would be governed by World Trade Organization rules.
The CBI conference precedes Chancellor of the Exchequer Philip Hammond’s Autumn Statement on the economy on Wednesday, when he will outline the government’s priorities for tax and spending.
Many business leaders favored staying in the EU. Since the June 23 vote went the other way, the CBI has led calls for the U.K. to maintain tariff-free ties to the bloc, while ensuring that British companies can continue to tap workers from the EU. May has pledged to curb immigration, a principal demand of the “Leave” campaign, but one that EU leaders have said is incompatible with continued single-market access.
May’s spokeswoman, Helen Bower, did not explicitly rule out the possibility of a transitional deal, saying that there’s “a range of issues” that would need to be worked through during the Brexit talks. Bower made clear the U.K. would not try to extend the Brexit negotiations beyond the current limit of two years, after which the country will leave the EU even if no deal on the future trading relationship has been signed.
“We will not be seeking to extend the Article 50 process,” she told reporters in London on Monday. “By the end of March 2019 is the latest point” that May wants the U.K. to leave the EU, Bower said.
So far May has yet to provide a detailed road map of the government’s Brexit plans. Executives at companies ranging from U.K. advertising giant WPP Plc to U.S. bank JPMorgan Chase & Co. have warned that uncertainty has hamstrung business.
“I understand, and people at WPP understand, that the government wants to maintain flexibility in the negotiations with the EU,” WPP Chief Executive Officer Martin Sorrell said at the conference. “But what everyone in this room wants is more certainty.”
May told the CBI on Monday that she would not provide a “running commentary” on the Brexit negotiations.
Drechsler said business leaders understand the need for discretion but just want more clues as to May’s intentions.
“We’re not asking for a running commentary, but we are looking for clarity and, above all, a plan,” he said.