Theresa May reassures business leaders against abrupt Brexit

Theresa May hinted at transitional agreement with the European Union to avoid an abrupt departure. Photograph:( AFP )

AFP London, United Kingdom Nov 21, 2016, 05.07 PM (IST)

Prime Minister Theresa May sought to reassure business leaders nervous about the "cliff-edge scenario" of Britain leaving the EU on Monday, as she announced a boost in research investment.

May made the announcement at the Confederation of British Industry (CBI) annual conference, shortly after industry leaders warned her about the impact of an abrupt departure from the EU and its customs union.

"Businesses are inevitably considering the cliff-edge scenario -- a sudden and overnight transformation in trading conditions," Paul Drechsler, CBI president, said Monday. "If this happens, firms could find themselves stranded in a regulatory no man's land."

In comments widely interpreted as referring to a possible transitional arrangement with Brussels, May said: "We don't want a cliff-edge".

Businesses "want to know with some certainty how things are going to go forward. That will be part of the work we do in terms of the negotiation," she said.

But companies at the gathering voiced their concerns.

"I'm not too optimistic about Brexit," a representative from German engineering firm Bosch told AFP, speaking on condition of anonymity. "I don't see things moving in the right direction".

Some business leaders have called for a temporary deal to set the terms of trade between Britain and the EU if a full deal cannot be reached in the two-year window available to arrange Britain's divorce from the bloc. "It's really about making sure that we have a transition in term of regulatory regime," Rain Newton-Smith, CBI chief economist, told AFP. 

Research boost 'important' 

The prime minister has so far refused to outline what she will demand from EU leaders, but promised to update business on plans.

"If we approach the difficult negotiations to come in the right way, with the right spirit, we can strike a deal that's right for Britain and right for the rest of Europe too."

One of her government's top priorities would be to secure an "early agreement" on the status of British nationals in Europe and EU nationals in Britain. The continued availability of a European workforce is a key concern for British businesses.

May also announced her government would invest an extra £2 billion a year ($2.5 billion, 2.3 billion euros) in science research and development by 2020 and committed to the plans of the previous government to introduce the lowest corporate tax rates in the G20.

"Today, Britain has firms and researchers leading in some of the most exciting fields of human discovery," she said. "We need to back them and turn research strengths into commercial success."

Mark Lloyd Davies, senior director of Johnson & Johnson, called the announcement "very positive".  "We can always want more but it's not trivial," he said. "It's not a gesture, it's actually important".

May spooked some industry leaders last month when she slammed "dysfunctional" markets and warned tax-avoiding multinationals she was "coming after" them during her first keynote speech as leader. However, she struck a softer tone on Monday, saying her government "will always believe" in free markets, capitalism and business but insisted they needed to serve the interests of everyone.

Other speakers at the one-day conference included Paul Kahn, president of Airbus Group UK, and Nicola Mendelsohn, Facebook's vice president for Europe, the Middle East and Africa.

The social networking site on Monday became the latest US tech giant to announce new investment in Britain with 500 extra jobs.

The British economy has remained resilient in the face of post-referendum uncertainty, but finance minister Philip Hammond is expected to announce a downgrade in future growth prospects when he presents the government's first major post-Brexit financial statement on Wednesday.

(AFP)