Danny McCance 13 Mar 2019 04:44pm

Business slams temporary tariff regime

Business groups have criticised the government’s proposed tariff regime, announced today, which will be imposed in the event of a no-deal Brexit

In its statement, the government announced that it would impose the “temporary tariff” under which “87% of total imports to the UK by value would be eligible for tariff-free access”.

The announcement came ahead of this evening’s meaningful vote, “to ensure MPs are fully informed”.

Tariffs would still apply to the remaining 13% of goods from what trade policy minister George Hollingbery describes as “the most sensitive industries”.

“This balanced approach will help to support British jobs and avoid potential price spikes that would hit the poorest households the hardest,” he said.

However, Carolyn Fairburn, director general of the Confederation of British Industry, disagreed, telling BBC Radio 4’s Today programme, “This is a sledgehammer to our economy”.

She said it shows “everything that is wrong with a no-deal scenario” adding that “the biggest change in terms of trade this country has faced since the mid-19th century” has been imposed without input from businesses – leaving little time for them to prepare.

“This is no way to run a country. What we potentially are going to see is this imposition of new terms of trade at the same time as business is blocked out of its closest trading partner.”

Nick Levine, head of enterprise at ICAEW said, “While the tariff-free access legislation is well meaning, there will be both winners and losers.”

He said that the government should have introduced the new regime “by first consulting businesses for their input to understand potential outcomes and how to protect the economy”. What businesses really require is certainty, he added.

“In the light of the lack of clarity on the terms of the UK’s exit from the EU, businesses have already made decisions about pulling investment from the country,” Levine said, adding that this could also be made worse in the event of further delays to the March deadline.

The Federation of Small Businesses’ national chair, Mike Cherry, suggested that zero or reduced tariffs would see small businesses “undercut” by cheaper foreign products.

“A sudden no-deal Brexit on 29 March would bring widespread overnight changes to the way small firms do business, which most are unprepared for. At a time they’d be working hard to adapt, the last thing they’d need is their overseas rivals being given a leg-up,” said Cherry.

He also criticised the temporary nature of tariffs, which he said would damage small business. After being “forced to adapt their business models”, they would then “face further changes in the future”.

The impact of continued uncertainty was not lost on Allie Renison, head of Europe and trade at the Institute of Directors.

"Making these tariff decisions temporary will lead to widespread confusion about what may change and when, as firms will want to know well in advance about how duties may rise,” she said, adding that unpredictability could also affect trading relationships with non-EU countries.

This information is the “bare minimum” needed to inform traders, but “it has come far too late to allow businesses to be ready in just a few short weeks”, she argued.

Renison said that the unilateral tariff cuts, while good trade policy, need to be done in a “measured, open and consultative way in order to get support from businesses and the public”.

“Unfortunately there has been virtually none of that from government in the run-up to this point,” she added.

This opinion was shared by the British Chambers of Commerce (BCC), which said that the sudden tariff changes “would be an unwelcome shock to many of the businesses affected”.

“While ministers have clearly listened to our arguments and maintained targeted protection in some areas, overall there has not been enough consultation, preparation or planning to support the firms and communities that could find themselves at the end of a sudden shift in tariffs,” a BCC statement read.

Likewise, Cherry said that the announcement comes too late, “leaving businesses in the lurch for a tariff scheme that has been largely worked up behind closed doors with little engagement with the business community”.

Earlier today, in a Business, Energy and Industrial Strategy Committee evidence session, business secretary Greg Clark said it is important that businesses know today’s announcements are a “contingency”, rather than anything definite.

However, he added that “it is a very powerful reason why we should avoid” a no-deal scenario and that “there is no easy choice to either apply tariffs to imports from the EU, increasing cost to consumers or manufacturers, or going immediately and abruptly to zero tariffs for other nations, disrupting arrangements there. Neither is palatable”.

“My determination, and I think many people in this House of Commons, is to ensure that they never have to be enacted in this emergency way, and that is the most important requirement on all of us,” he added.

Following yesterday's vote, in which prime minister Theresa May's second Brexit deal was defeated, later today MPs will vote on whether or not to pursue a no-deal Brexit.