Benefits of Brexit divergence ‘vastly outweighed’ by costs, claims

CBI
The economic benefits for diverging from EU rules and regulations will be “vastly outweighed” by the costs of Brexit, the CBI has
warned in its latest call on the Government to push for a soft Brexit.

The intervention by one of the UK largest business groups puts it at loggerheads with pro-Brexit elements in the Government
three months after the group called for the UK to remain in the EU customs union.

In a 90-page sector-by-sector analysis of the UK economy published today, the group said its members had identified some
areas, such as defence and construction procurement, where Brexit could reduce regulation, but with only marginal upside.

“These opportunities are limited and are vastly outweighed by the costs that will be incurred if the UK’s rules change so much
that it reduces smooth access to the EU’s market,” said Carolyn Fairbairn, the CBI director general.

Any deal must push for more than the alignment of rules or mutual recognition of standards laid out in David Davis’ Vienna
speech. Instead, businesses needed “ongoing convergence – where rules remain in lock-step over time” the CBI said.

This echoed a call from Michel Barnier on Tuesday for the UK to sign a “non-regression clause” committing it to EU standards on
an ongoing basis, in a bid to reassure the remaining 27 members that the UK would not try to undercut EU standards.

The CBI analysis challenges many of the assumptions among Brexiteers that leaving the EU can deliver competitiveness gains
through slashing EU red tape and regulations.

The research proved that “businesses are not calling for a bonfire of regulations,” Ms Fairbairn told The Daily Telegraph.

It was important to note that firms valued the benefits of convergence on standards “very highly”, Ms Fairbairn added.
Committing to long-term regulations might help the UK to continue to have “influence over those rules”.

The analysis of some 23 different sectors was built upon thousands of interviews with businesses over a six month period. It
found that firms believed EU “regulation to be good” and lacked the capacity to “manage significant legislative changes”
involved with changing from current rules.

A ‘cake and eat it’ option, of cutting regulations in some fields such as agriculture, but retaining EU standards in others, would
not work either because of firms’ deeply integrated supply chains which criss-cross sectors and nations.

“When negotiators work on the future relationship between UK and EU rules, an understanding of this interconnectedness is
essential,” the CBI said.

Maintaining EU standards in public procurement, the rules on the awarding of contracts to firms in areas such as rail
infrastructure was “essential” the report said. Otherwise firms would no longer be on a level playing field when pitching for EU
government contracts worth £1.5 trillion each year.

German company Siemen’s recent winning of the £1.6bn Thameslink contract illustrated the win-win involved for both sides in
striking a deal on this issue, the CBI argued.

Ditching sector-specific regulations would also prove damaging. Leaving the European Aviation Safety Agency (EASA), for
instance, would leave the UK in a regulatory “no man’s land” without influence over either the EU or US rule making – the
dominant markets for aerospace.

Such a move would also “increase costs for UK business at every part of the [aerospace] supply chain” potentially risking growth
in the highly valued aerospace sector which drives £28bn of UK exports each year, the report said.

More red tape rather than less could arise as in some areas in the UK sought separate regulatory regimes, as firms would have
“to comply with two sets of rules instead of one,” according to the Construction Products Association. This would add to cost
pressures in an already struggling construction sector.
The report comes amid clear signs in recent months that Prime Minister Theresa May is moving towards a more high-alignment
Brexit, including in her Mansion House Brexit speech. The Daily Telegraph understands that the momentum behind convergence
on rules is gathering pace as business groups pour detailed information into the Whitehall system.

Brexit: Sticking to EU rules 'vastly' more beneficial than creating UK's

own, says business group
'For the majority of businesses, diverging from EU rules and regulations will make them less globally competitive,' says
Confederation of British Industry

The economy will be much better off if the UK sticks closely to EU rules rather than creating its own after Brexit, a leading
business group has said.

Eighteen of 23 sectors analysed would benefit from regulations that remain aligned with Brussels, the Confederation of British
Industry found.

It said the costs of divergence would "vastly outweigh" the benefits in most parts of the economy.

The CBI spoke to thousands of business leaders up and down the UK over a six-month period and found that, while there were
opportunities to make beneficial new rules in sectors such as agriculture, shipping and tourism, these are limited.

In sectors such as aerospace, aviation, chemicals, financial services and technology, the majority of important regulation should
remain the same in order to protect the economy and jobs, the CBI concluded.

The research found that changes to rules in one sector are likely to also 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 CBI said.

The Brexit deal should set a new international precedent for liberalising trade in services and digital products, the report says.

“The task of unpicking 40 years of economic and regulatory integration is complex and colossal,” CBI Director-General Carolyn
Fairbairn said.

“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.”

She called for a “major acceleration” in the partnership between business and government in order to make a success of Brexit.

“It’s vitally important that negotiators understand the complexity of rules and the effects that even the smallest of changes can
have,” she said.