Business chiefs tell Theresa May to delay Brexit to avoid chaos in new report

The proposal to extend the Article 50 negotiating period was immediately backed by Sir Martin Sorrell

Business groups want Ms May to ‘avoid chaos’ by delaying leaving the EU until after March 2019 (Getty )

British business chiefs have said Theresa May must consider delaying Brexit beyond March 2019, to avoid the chaos of an EU withdrawal for which the country is unprepared.

A report from one of the UK’s foremost business organisations said extending the negotiation period would be the “simplest solution”, to avoiding a disorderly Brexit that could do untold damage to the economy.

The proposal from the Institute of Directors (IoD) directly contradicts the Prime Minister’s goal of a clean break in two years, but was immediately backed by one of the country’s foremost business figures, Sir Martin Sorrell.

The IoD also proposed a string of other measures which fly in the face of Ms May’s plans, including a transition period in which the UK stays in the single market, remains under EU law and maintains existing customs arrangements.

It came as the Bank of England downgraded its forecasts for the British economy this year, as Governor Mark Carney warned GDP growth and take-home wages are being dragged down by fear of what will come after Brexit.

The IoD’s report on how the Government should manage the move to new trading arrangements also follows reports of major Cabinet divisions over what kind of transition to have.

But even before any transition period begins, the IoD’s report suggested extending the two-year period for negotiations set out in Article 50 of the Lisbon Treaty.

While the organisation accepts it would be “politically contentious” for a Prime Minister who has promised to pull the UK out of Europe by March 2019, it added: “This is the simplest way of allowing sufficient time for full negotiations to include a comprehensive free trade agreement, and ensuring one single period of adjustment/implementation for business, negotiators and government machinery to grapple with.”

The move would also mean that freedom of movement of EU citizens in the UK would continue beyond March 2019, which the Government has also ruled out.

WPP chief executive Sir Martin told The Independent he would be “happy to endorse this to reduce the level of uncertainty”.

Meanwhile, CEO of Dixons Carphone Sebastian James said: “For me, there are a great many issues that seem to be very far from resolution, and these almost certainly need much more time to sort out, one way or another, than we have.”

The IoD also proposed maintaining membership of the European Economic Area during a transition period leading up to a new free trade deal with Europe, something which could see the country stay in the single market as long as 2022.

The suggestion from a major business group piles pressure onto Ms May, who in September is set to face a cross-party push to make continued membership of the EEA a part of her Brexit plans.

Head of EU and Trade Policy at the IoD, Allie Renison, said: “Prioritising interim arrangements and thereby mitigating the risks of EU exit means the eventual opportunities aren’t diminished by short-term chaotic cliff edges.”

Maintaining customs arrangements similar to those currently in operation under the EU’s customs union was another proposal, including the Common External Tariff and continuing to transpose EU customs and VAT legislation into British law.

The IoD also said the Government should consider prolonging the application of EU law, again contrary to Ms May’s plan to move the UK out of the European Court of Justice’s jurisdiction on the day of Brexit.

A Government spokesperson said: “We have been clear that we believe an implementation period is in the interests of both the UK and the EU, providing certainty to businesses and citizens, and ensuring we avoid any cliff-edge as we move to our future partnership.

“Since the referendum, the Government has engaged with businesses across the country, and we are now intensifying this process to ensure the voice of the British business community is being heard and reflected throughout our negotiations.”

Over the summer, reports of cabinet splits on Brexit have pitched Chancellor Philip Hammond and Home Secretary Amber Rudd against International Trade Secretary Liam Fox and Foreign Secretary Boris Johnson.

Mr Hammond is said to prefer a longer transition period that retains some elements of the free movement and the customs union, while Dr Fox has indicated that a failure to fully control borders after March 2019 would be a betrayal of the referendum result.

The Bank of England downgraded its growth forecasts for the British economy this year, just days after EU statistics indicated the eurozone is growing at twice the rate of the British economy.

It now expects the economy to grow by 1.7 per cent this year, down from a previous forecast of 1.9 per cent. Meanwhile, growth is now tipped to slow to 1.6 per cent in 2018, down from a previous forecast of 1.7 per cent.

In a press conference on Thursday, Governor Mark Carney said the Bank is helpless to prevent the “weaker real incomes” accompanying Britain’s withdrawal from the European Union, and that households had cut back on spending and businesses on investment, slowing the economy’s growth.

Labour MP Darren Jones, a leading supporter of the Open Britain campaign group, said: “British business is rightly fed up of ministers fighting like cats in a sack over the detail of transition, our future immigration policy, and other aspects of Brexit.

“To protect UK jobs and investment, they need clarity from the Government about where we go from here, as well as a totally frictionless trading relationship between Britain and the European Union in future.

“That can only mean continued membership of the single market and the customs union.”