Friday, June 5, 2020

Business leaders reject ‘max fac’ post-Brexit customs proposal

The majority of business leaders want post-Brexit customs arrangements that avoid the need for new customs processes with the EU, even if they take longer to put in place, a new survey of 800 business leaders by the IoD reveals.

More than twice as many members of the Institute of Directors in the poll would opt to maintain ‘near-frictionless’ trade, rather than relying on trade facilitations under the so-called ‘max fac’ proposal.

The IoD found support for a solution that avoided the need for customs declarations was even stronger among companies that trade internationally, with six out of ten backing this approach. No size category of business saw majority support for the ‘max fac’ option. Even for firms that don’t trade, support for avoiding declarations in trade with the EU was more than twice the level of that for max fac.

In the survey, avoiding customs-related disruptions was IoD members’ number one priority for the UK’s negotiations on its future economic relationship with the EU. The business group in February put forward a proposal for a partial customs union, which would avoid complex rules of origin for many firms, while still giving the UK an independent trade policy.

On standards and regulations, most directors believe that maximising EU market access and minimising regulatory divergence was most important for their organisation (55%), well ahead of the potential benefits of tailoring standards to domestic needs (15%) or realigning rules with other major standards-setters like the US (12%).

Continued regulatory alignment and prioritising access to the EU was the clear priority for directors in firms across all sizes of businesses – from micro to large firms. While support for this approach was particularly strong for those trading in goods, it was also the preferred objective for directors across service sectors.

Stephen Martin, Director General of the Institute of Directors, said: “As the Government discusses options for post-Brexit customs this week, they should take note of the strong preference among business leaders for a solution which keeps trade friction to an absolute minimum.

“Pursuing an option that relies on facilitations and simplifications doesn’t seem to cut it for our members. In short, ‘max fac’ is not the favoured route for keeping trade in full flow. We’re in uncharted territory here, and so far we have no clarity on what customs position the UK will adopt.

“What is clear, however, is that the firms who are actually responsible for driving forward ‘Global Britain’ want to see an outcome that avoids making trade with our biggest market more difficult, even if that takes longer to put in place. They want to see the Prime Minister leading her Cabinet out at the end of this week with an agreed position, and then pushing on with negotiations with the EU.

“For most directors, the potential gains of diverging from EU regulations don’t merit the price of lost market access. This view is shared across the spectrum of firms, putting paid to the notion that it’s only big business which prioritises alignment and trade continuity.

“Equally, the EU should be more flexible in negotiations on our future economic partnership. It should take heed of its own precedents for bespoke and differentiated access agreements outside the Single Market and Customs Union.”

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