The Tory top brass must not abandon business

“A Conservative government will always listen to your voice and back you every step of the way as you help grow our economy and create more good jobs.” 

At the Times CEO summit on Tuesday, Theresa May, a Conservative Prime Minister, had to go out of her way to reassure British business that the Party is listening to its concerns. This should not have to be said, but in the current climate it was a necessity. Worst of all, the reassurances are totally unconvincing – the Conservatives are now driven by a toxic mix of May’s anti-business, anti-immigration policy ideas and hardline Brexit populism.

‘F*** business’, said Boris Johnson, a man who has long coveted the leadership of the Conservative Party and the country. This is an apt summary of the parlous state of British governance and about as detailed as Boris’s ideas on Brexit policy get. Boris was once considered a Liberal Conservative but now, with his reputation ever diminishing, he has become a rabble-rousing Brexit populist.

Considering that Boris once lauded the benefits of the Single Market, it’s clear his hard-line position had been adopted for opportunistic reasons. Attempting to piece together the shattered remnants of his career prospects, he appeals to the baser instincts of Sun readers with his patronising mimicry of working class vernacular. He sells them snake oil by insisting they can have a cake and eat it Brexit fantasy without trade-offs, risks or costs.

When the details matter and so much is at stake, bullish optimism without substance is out of place.

His ‘f*ck business’ comment was at a private reception, when he was challenged about the concerns raised by Airbus and BMW over the threat to jobs and investment. It’s another nail in the coffin for the Conservative Party’s reputation as the ‘Party of business’ and/or the ‘Party of the economy’.

Airbus raised legitimate concerns about the corrosive effect of persistent uncertainties. They are not the first and won’t be the last business to sound such a warning, yet senior Cabinet Ministers have been critical rather than reassuring. With Conservative hard Brexiteers incredibly blasé about the benefits of the Single Market and the consequences of a ‘no-deal’ Brexit, and the government’s lack of transparency, it’s little wonder that the UK is seen as a risk.

Whether it likes it or not, the ‘Party of business’ is now the ‘Party of Brexit’. The Conservatives own it, come good or ill. If they are to conserve their reputation and protect British jobs and prosperity they need to prioritise an economically secure Brexit. Don’t expect the electorate to be fair or consistent, whether Leaver or Remainer, they will punish the Conservatives if they make them poorer by botching Brexit.

The state of play in the negotiations right now is that there is a Free Trade Agreement on the table. The proposed FTA includes tariff and quota free trade, very basic provisions for services, with add-ons for cooperation on defence, security and policing. This would be a good deal for a distant country looking to enhance its trading relationship with the EU, but it completely falls short of what is needed to conserve free flowing trade between the UK and the EU.

Free Trade Agreements are very basic frameworks for trade and even a “super-charged” CETA++ deal would represent a major downgrade from being within Single Market. British industry is concerned about regulatory issues, disruption to Just In Time supply chains and delays caused by Rules of Origin issues. An FTA will do nothing to address any of this. The friction at the border will increase very significantly and a distinct arrangement for Northern Ireland will become necessary, dividing the union.

The Single Market is the legal structure that allows for free-flowing trade between Britain and its European partners, which accounts for 43% of our exports. It’s a complex eco-system of common rules and there is no means of leaving it that doesn’t result in lasting costs to the British economy. Harmonised regulation means freight can travel from Glasgow to the Turkish border with minimal checks, divergence means a sharp rise in conformity assessment, testing and inspection of goods before they enter the European marketplace.

From here there are only two ways of reassuring British business and setting a course for an economically secure future. One is for the government to announce its intention to remain party to the European Economic Area Agreement, an existing functioning system for Single Market participation and wide ranging political cooperation for non-EU members.

This has always been my preference, because I believe that the UK would play a leading role in the European Free Trade Association and with its clout added it would create a significant trade association. The UK would be leading a market based alternative partnership to the EU, potentially eventually adding to its number, if another Member State leaves in the future. Out of political union, in the market and into an emboldened new alliance. Not a bad situation. Sadly, the political obstacles to this now seem very difficult to overcome and since parliament recently rejected this option, the prospects look bleaker than ever.

The second option is for the government to start from scratch and request a new Association Agreement (AA) fully tailored to the unique UK-EU relationship. This could well take considerably more time than an “off she shelf” solution such as the EEA (which is a form of AA), and at times it will be like reinventing the wheel, but it would allow for a far deeper and wider ranging economic partnership than an FTA, and we could build a new system of cooperation which builds on the EU’s previous agreements.

The EU has AAs of varying depths with a wide variety of countries: the term itself is broad and merely describes a means of bundling a variety of agreements into a single treaty. As one senior cabinet member has reportedly said: “It’s an empty box, you can put whatever you want in it.” What Britain needs is comprehensive agreements for trade, customs, investment, security and wide ranging political cooperation, and although this will require some red lines to turn pink (participation in joint EU agencies and programmes requires ECJ oversight) it isn’t in such an explicit way that should prevent onboarding the hardliners.

To create a ‘deep and special relationship’ the UK-EU Association Agreement would need to include a system of joint governance, a robust institutional framework consisting of a joint Anglo-Euro court, a market surveillance authority, a joint council and committees. This is the means by which the UK, a third country, can achieve privileged market access and participation in EU agencies and programmes in a way that other ‘third countries’ cannot, by signing up to common rules and common enforcement.

There are no other economically sensible Brexit routes. Any fear of sulking hard Brexiteers not getting the “CETA option” they want pales in comparison with the potential wrath of the voters when they punish the government for the bad management of the economy. It’s time to face facts, the deal we want with the EU requires us to accept our obligations and compromise on hastily set red lines.

As it stands, the Conservatives are no longer the Party of business nor the economy. With a socialist Labour Party led by Marxists and a starkly divided Conservative government wracked with Brexit madness, business has nowhere to turn to for support in Britain right now. Inevitably, many will simply move some operations abroad, delay or cancel investment and look elsewhere in Europe to set up shop. It’s time to change course.