British Business Tells May It Wants EU Rules After Brexit

(Bloomberg) -- British businesses overwhelmingly want to stick to European rules after Brexit, according to the most detailed sector-by-sector analysis of what companies need the U.K. to fight for in negotiations.

The Confederation of British Industry, which compiled the data, argues that the opportunities presented by breaking free from European Union regulations are vastly outweighed by the cost of losing access to Europe’s single market.

While shipping, agriculture and tourism could benefit from an overhaul of rules after Brexit, 18 of 23 industry and service sectors would be better off with regulations that largely remain the same as EU ones.

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

The report from Britain’s biggest business lobby group lays bare the tightrope Prime Minister Theresa May is walking as she seeks to negotiate a Brexit deal that satisfies the pro-Brexit wing of her Conservative Party without damaging trade and investment.

She hopes to finalize a divorce deal with the EU in the Fall, though the details of the new, post-Brexit trading relationship probably won’t be finalized until after Britain leaves the bloc. With less than a year until exit day, what Brexit will mean is still unclear.

May has identified chemicals, medicines and aerospace as industries where Britain will want to remain close to the EU, while singling out fisheries and agriculture as potential areas for divergence. She has also said financial services should be part of a “deep and comprehensive partnership” with the EU after Brexit. Those views are supported by the CBI’s findings.

However, the CBI warned that a sector-by-sector approach to rules posed risks as sectors don’t operate in isolation. "Changes to rules in one sector have significant knock-on effects for companies in other sectors and throughout supply chains," it said. The EU has also rejected May’s approach as cherry-picking.

The CBI’s 100-page report, called Smooth Operations, followed thousands of conversations between the lobby group and its members over six months. The group identified three overriding principles that should guide the EU-U.K. negotiations:

• The U.K. and EU should negotiate ongoing convergence of rules for sectors where rules are crucial to ensure the trade or transport of goods and services
• The two sides should aim to set a new precedent in the trade of services and digital products, which will increasingly be cross-border industries
• The two sides should broker mechanisms giving both parties influence over rules and allowing for enforcement of those regulations

“It’s hard to overstate the importance of the decisions that will be taken over the next six months,” said Fairbairn. “A major acceleration in the partnership between business and the U.K. government is needed to make a success of Brexit."

--With assistance from Samuel Dodge

To contact the reporters on this story: Alex Morales in London at amorales2@bloomberg.net, Suzi Ring in London at sring5@bloomberg.net.

To contact the editors responsible for this story: Flavia Krause-Jackson at fjackson@bloomberg.net, Emma Ross-Thomas, Kevin Costelloe

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