A new report from the CBI is seeking to inform Brexit negotiations by outlining where British businesses want to stay close to EU rules and where they want divergence.
The organisation’s Director-General Carolyn Fairbairn says the task of unpicking 40 years’ economic and regulatory integration is complex and colossal, adding that the new report, called ‘Smooth Operations’ is based on thousands of conversations with UK businesses, as well as dozens of leading trade associations.
It provides an A to Z of the rules that will matter after the transition period. From architects to zoos, it outlines the regulatory needs of 23 industry and service sectors, of which 18 prefer convergence or alignment for the majority of regulation that matters.
The CBI study, compiled over a six-month period, says Brexit presents opportunities for rule changes in sectors such as agriculture, shipping and tourism that could benefit the British economy and consumers.
However, the report adds that these opportunities for divergence are vastly outweighed by the costs of deviating from rules necessary to ensure smooth access to the EU, the UK’s largest trading partner.
Another important finding is that changes to rules in one sector have significant knock on effects for companies in other sectors and throughout supply chains.
Where rules are fundamental to the trade or transport of goods, such as in the automotive, chemicals and life sciences sectors, remaining in lockstep with the EU is essential. The Brexit deal should set a new international precedent for liberalising trade in services and digital products, the report says. It also outlines opportunities to improve how EU rules are implemented in the UK, such as procurement processes for the defence and construction industries, which would allow the UK to do things differently and better without diverging from EU rules.
While ‘Smooth Operations’ acknowledges the UK will no longer have the same say in EU rule-making as member states, new mechanisms will be needed to manage alignment and for the UK to influence rules that affect it.
Fairbairn said: “This report comes from the heart of British business. It provides unparalleled evidence to inform good decisions that will protect jobs, investment and living standards across the UK.
“The experience of companies across the country will be essential in the months ahead. A major acceleration in the partnership between business and the UK Government is needed to make a success of Brexit and to ensure this experience is heard.
“It’s vitally important that negotiators understand the complexity of rules and the effects that even the smallest of changes can have. Deviation from rules in one sector will have a knock-on effect on businesses in others, and divergence from rules in one part of a production process will have consequences for market access throughout entire supply chains.
“It’s hard to overstate the importance of the decisions that will be taken over the next six months. Put simply, for the majority of businesses, diverging from EU rules and regulations will make them less globally competitive, and so should only be done where the evidence is clear that the benefits outweigh the costs.”