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U.K. business warns of cost of PM’s ‘hard Brexit’ plan

Britain's Prime Minister Theresa May speaks at the annual Conservative Party Conference in Birmingham, Britain, October 2, 2016.


A growing chorus of British business leaders and organizations are raising concerns about Prime Minister Theresa May's approach to Brexit and immigration, with some calling her government "anti-business."

On Monday more than 100 business leaders signed an open letter to Ms. May, slamming a government proposal to require companies to compile lists of foreign workers. "The Prime Minister cannot claim to be open to trade whilst demonizing workers from other countries, nor can she claim to be pro-enterprise when her ministers issue such anti-business rhetoric," the letter said.

The government said it will drop the proposal but the letter came as several business organizations have expressed fears about Ms. May's comments last week indicating that she will push for a "hard Brexit", cutting all ties with the EU and then negotiating a trade deal. She has also taken a harder line on immigration, saying repeatedly that Britain wants to regain control over immigration as part of the negotiations with the EU.

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That has rattled many business executives who worry about Britain losing unfettered access to the European single market and cutting off the free flow of talent from the EU. Financial institutions are particularly vulnerable since many depend on EU "passport" provisions that allow them to set up in Britain and offer services across the EU. Many executives had hoped Ms. May would opt for a "soft Brexit", which would mean keeping some kind of connection to the EU similar to that of Norway or Switzerland.

Ms. May's comments also sent the value of sterling plummeting, with the pound now trading around a 31-year low against the U.S. dollar. While a lower currency helps exporters, the devaluation has caused several companies, including airliner EasyJet and retailer Sports Direct, to issue profit warnings.

"While many manufacturers have seen something of a bounce this summer, the UK's services sector has slowed significantly, and our data suggests that slower growth is likely in the months ahead," the British Chambers of Commerce said Monday. It added that there needs to be "a firm demonstration that the government has a clear and coherent strategy to defend the U.K.'s economic and business interests in the negotiations that lie ahead."

Many business groups are now calling on Ms. May push for a softer Brexit and maintain access to the single market.

The government "must deliver barrier-free access to the EU's single market, which is vital to the health of the UK economy, especially to our manufacturing and service sectors," said the Confederation of British Industry, one of the country's largest business organizations.

"What we have heard over the last few days, if you add up the messages in total, are signs that the door is being closed, to an extent, on the open economy, that has helped fuel investment," CBI's director-general, Carolyn Fairbairn, told the Times newspaper on Monday.

The British Retail Consortium, which represents the country's retailers, also raised concerns on Monday about the consequences of Britain leaving the EU without a trade deal, which would leave the country's trade subject to World Trade Organization tariffs. The group said retailers have been hit harder than most businesses by the drop in sterling because they were among the country's biggest importers. And it said if Britain fell back on WTO rules "the new tariff rates that the U.K. would apply to imports from the EU would be highest for consumer staples like food and clothing."

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Some Conservatives are leery at the government's plans, too. Chris Philp, a London-area member of Parliament whose constituency riding includes thousands of financial services workers, told the party's convention last week that he favours a soft Brexit. "If we were to exit without any kind of negotiated deal, something like 10 per cent of London's work force can be at risk," he told a panel discussion. The inability to attract skilled people from abroad would also have "an adverse economic effect," he added.

On Monday, David Davis, the minister in charge of Brexit negotiations, told Parliament that the objectives of the Brexit talks were "simple". "Regain control of borders, regain control of our laws, regain control of our money and at the same time get the best possible access to the European market that we can negotiate," he told Parliament. He later added later that other countries have managed to access the EU market without being EU members and Britain will as well. And he declined to say if Britain would seek some kind of interim arrangement.

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About the Author
European Correspondent

Paul Waldie has been an award-winning journalist with The Globe and Mail for more than 10 years. He has won three National Newspaper Awards for business coverage and been nominated for a Michener Award for meritorious public service journalism. He has also won a Sports Media Canada award for sports writing and authored a best-selling biography of the McCain family. More


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