Brexit uncertainty risks economic damage to firms, warns Morgan

On 14 December 2017, the Treasury Committee published its report on transitional arrangements for exiting the European Union, concluding that an agreement between the UK and EU on transitional arrangements was urgent.

However the Committee has criticised the government's response, published today, which states that "as with any regulatory change businesses are advised to understand how these may affect their business and explore potential impacts".

Nicky Morgan MP, Chair of the Treasury Committee, said: “The Committee is pleased that the overall framework for transitional arrangements recommended in this report has largely been accepted by the Government. Businesses are now crying out for the certainty of having a transition period secured.

“But, as the draft texts published by both sides show, transition is not yet a done deal. It is vital that remaining disagreements over the duration and governance of the transition period are resolved quickly. A failure to reach agreement in the March European Council would be economically damaging, and dramatically diminish the value of whatever is eventually negotiated.

“There is less pragmatism on display from the Government when it comes to the long-term relationship between the UK and the EU. Key questions remain unanswered and details are in short supply. “Canada plus plus plus” is not a basis for long-term decision making.

“In this environment of pervasive uncertainty, it is extraordinary that the Government – in its response to the Committee’s Report – is advising businesses to “understand” and “explore potential impacts” of “regulatory change” arising from Brexit. Firms can hardly begin to understand change until they know what it consists of. Brexit uncertainty for businesses still looms large.

“And in the absence of clarity, they will have no choice but to prepare for the one eventuality that they can understand: the worst-case scenario of a trade relationship based on WTO commitments. As the Committee concluded, adaptation to ‘WTO rules’ could involve a ‘relocation of jobs and economic activity from the UK to the rest of the EU’.”