Brexit White Paper: CBI initial press response

Carolyn Fairbairn, CBI Director-General, said:

“The Brexit White Paper reflects much of the evidence that business has been highlighting since the Referendum. This direction is welcome - protecting jobs and investment now and in future should be the guiding star for both sets of negotiators.

“Many of the intentions are reassuring. Seeking a free trade area for goods and a common rule book shows the Prime Minister has put pragmatism before politics and should be applauded.

“Businesses on both sides have been asking for frictionless trade between the UK and EU, and shared rules could go a long way towards delivering that. It is now the EU's turn to put economics before ideology on these proposals.

“The UK’s world-beating services industry, representing around 80% of our economy, will be pleased by moves to maintain free-flowing data, mutual recognition of qualifications and mobility for skilled workers across the EU. This is the right ambition that makes sense for both sides.

“But there are gaps in these proposals and more detail is needed on EU VAT, some services sectors and the new customs system. It will be a make or break summer. It’s vitally important UK negotiators get their heads down and work with businesses to grapple with the detail and get it right.

“With three months left to go, it is now a race against time. The EU must now engage constructively and flexibly, as must politicians from all UK parties. This is a matter of national interest. There’s not a day to lose.”

Cross-cutting issues that matter most for businesses 

Customs:

The EU is the UK’s most important trading partner in goods, accounting for 48% of exports and 55% of imports. Businesses will welcome the Government’s intention to deliver trade that is frictionless between the UK and the EU. Government must now engage closely with businesses on its plans for a new facilitated customs arrangement so that every part of the supply chain - from the lorry drivers to the manufacturers involved in trade - understand the intentions and requirements of this proposal. The Government’s acknowledgement of the need for a phased approach to deliver any new customs scheme is an important step forward. Over the coming weeks and months companies will be eager to engage on the details. Yet unless and until this model is proven to be viable, the UK should stay in a customs union with the EU.

Mobility and immigration:

Businesses will welcome the Government’s ambition for staff to travel easily between UK and European offices in order to provide services across borders. From automotive to accountancy, continued mobility across the Channel is vital for all sectors. The ability to travel freely on short-term business, without a visa and through streamlined border arrangements, is equally important. However, firms will be disappointed not to see wider migration issues on the negotiating table with Brussels. Free movement will end, but making a sovereign choice to negotiate immigration rules could help unlock future trade deals with the EU and the rest of the world.

Employment rights:

CBI members have been clear that there is no desire for a bonfire of employment rights after Brexit. They have also been clear that they could not accept a scenario where future UK employment laws are made without UK influence. Businesses are looking to the Government to explain exactly how a non-regression agreement would work, and to continue to influence EU employment laws that will take effect before Brexit to ensure these are well suited to the UK labour market.

Science & innovation:

Cutting edge science and innovation is an international game, bringing the best minds together to tackle some of society’s toughest challenges – from climate change to antimicrobial resistance. UK businesses and universities are central to the success of Europe’s world-leading science and innovation networks. Therefore reaching an agreement that sees them participate beyond Brexit is a win-win. This should include full access to all pillars of the upcoming Horizon Europe programme.

Data protection:

The strong alignment between British and European data standards opens the door to crafting a robust framework enabling the uninterrupted flow of data. The Government’s ambition to obtain an adequacy decision quickly will be welcomed by businesses, as will the recognition of the need to secure a continued role for the UK’s world-class regulator, the Information Commissioner’s Office, in shaping global data protection standards.

VAT:

The lack of information on how VAT will operate in future is a concern that matters for all businesses of all sizes, especially smaller firms concerned about cash flow. Greater clarity is needed urgently so businesses know they can continue to rely on existing one stop shop arrangements, particularly as the UK collects a significant amount of revenue on behalf of EU Member States.

Sector-by-sector analysis

Agri-food:

Very high levels of trade between the EU and UK for the food and drink sector means that any consequences of changes made to regulations would be felt on both sides of the Channel. A scenario where food had to go through stringent veterinary checks at borders, or where dairy farms had to be inspected by EU authorities would mean rising costs for consumers and lower quality food on both sides. These proposals show the UK Government is committed to avoiding this. A common rule book for goods, including agri-food will be warmly welcomed by agri-food and drink businesses, showing the Government has put pragmatism before politics.

Aviation:

Air connectivity contributes significantly to economic growth in the UK and within the EU through direct employment, facilitation of tourism and the increase of trade and investment. The Government’s ambition to secure an Air Transport Agreement to maintain current levels of market access will be welcomed as well as the recognition of the need for continued participation in EASA.

Broadcasting:

The UK is a European leader in broadcasting, with 1,400 TV channels, three times as many channels and more than twice as many on-demand services than any other European country. While businesses will welcome the assurance UK film and TV shows will still qualify as ‘European Works’, they will be disappointed by the lack of detail on the Government’s intentions to ensure UK broadcasting businesses will retain vital access to EU markets.

Consumer goods:

Firms employing around 300,000 people manufacture consumer goods in the UK, including luxury handbags, alarm radios, papers and shower gel. Businesses will welcome the Government’s intentions to maintain a common rulebook for consumer goods and active participation in EU technical committees to ensure consistency between UK and EU standards; both are essential for the smooth flow of consumer goods and keeping costs low for consumers.

Construction:

The ambition of frictionless and tariff-free trade between the UK and the EU will be welcome for construction firms that rely on the EU for 62% of building materials imports. It’s now vital that progress is made on agreeing a future immigration system that allows businesses to attract, retain and move both UK and non-UK staff as smoothly as possible, particularly to ensure the UK can meet its housing target.

Creative industries:

The creative industries are one of the UK’s greatest success stories, contributing £90billion to the economy. The EU is the destination for 45% of the sector’s £20billion of exports, making it a vital marketplace. Divergence from EU intellectual property and copyright rules may have an impact on the protections these firms enjoy, so business will look for further detail on the White Paper’s commitment to provide a confident and secure basis from which the creative industries can operate.

Defence:

The UK’s defence sector makes a significant contribution to both national security and economic prosperity, employing over 150,000 people and delivering £8.7billlion in GVA to the UK economy in 2016. Through the White Paper’s proposals on a UK/EU security partnership and its supplementary cooperative accords, industry will be pleased to see that the importance of continued access to European markets, supply chains and research and development programmes is recognised. The provisions around the ‘common rule book’ for manufacturing, in particular the UK’s ongoing participation in the European Aviation Safety Agency (EASA) and European Chemicals Agency (ECHA), will also reassure industry. We now need to see these ambitions turned into agreements if this important industry is going to continue to thrive, and continue to capitalise on opportunities in Europe and beyond.

Energy:

Secure, affordable and sustainable energy supplies are critical to households and businesses across the country, underpinning the UK’s economic health and prosperity and providing the foundations of a modern industrial strategy. Business will welcome the Government’s desire for broad energy cooperation with the EU, however more clarity is needed, especially on the UK’s future relationship with the Internal Energy Market and EU Emissions Trading System.

Financial services:

Whether raising capital, trading financial assets, hedging against or insuring for complex commercial risks, or managing investment portfolios on behalf of EU clients – UK financial services offer an enormous amount to businesses and individuals in the EU. While the new economic and regulatory arrangements proposed in the White Paper have the right intentions to preserve the mutual benefits of integrated markets, existing third country regimes are not fit-for-purpose.  Businesses require more detail on how existing third country access arrangements can be enhanced and expanded.

Haulage:

The equivalence between UK and EU rules on road transportation is essential to maintain unimpeded access for road haulage, businesses and consumers. While business welcome the White Paper’s commitment to ensure reciprocal access, the development of a permit system must not reduce market access and restrict the ability of UK operators to meet the demand of their customers.

Higher education:

The UK is second only to the US as a destination for overseas students – reflecting the strength and reputation of our world-class higher education sector. The White Paper is a step in the right direction, stating its commitment to important programmes like Erasmus+, but more needs to be done to ensure the UK remains an attractive destination for international students.

Hospitality & Tourism:

The EU is of critical importance for the UK hospitality and tourism industry, with over 65% of the 32 million people that visited the UK in 2016 coming from other EU countries, contributing £10 billion to the UK economy. Maintaining ease and safety for visitors is critical for hospitality and tourism trade, and the Government’s intention for reciprocal visa-free travel and the continued use of EHIC for UK and EU citizens will be welcomed. The Government’s long-awaited immigration White Paper will need to answer concerns about access to people in all levels of the labour market.

Life Sciences:

With 45 million packs of medicines moving from the UK to the EU and 37 million coming the other way, life science companies will welcome today’s announcements on future participation with the EMA to ensure the smooth delivery of medicines, as well as the commitment to the incoming clinical trials framework as called for in our Smooth Operations report. Businesses will now be seeking clarity on how the relationship between the UK and EMA will function in practice going beyond a third country provision.

Professional & business services:

Businesses welcome the commitments the Government has made to minimise the barriers to the establishment of services businesses, cross-border trade in services, and investment in services as well as the mutual recognition of qualifications. However, more detail is needed on how this would apply to regulated professions, including lawyers and auditors, and the Government’s approach on other potential regulatory barriers to trade in professional and business services, such as professional bodies and standards of conduct, regulatory frameworks and standards. In short, further clarity is needed across a range of issues to preserve the competitiveness of the UK’s world-beating professional and business services firms.