Boris Johnson's Brexit trade deal threat risks destroying UK trade with the EU, warn British businesses

  • Business leaders urge Boris Johnson to scrap his threat to trade with the EU without a deal.
  • The prime minister this week said Britain would walk away without a trade agreement if Brussels does not agree to the UK's terms of a Canada-style deal.
  • However, this approach — compared by Johnson to Australia's relationship with the EU — would unleash chaos at the borders and cost billions, representatives of multiple sectors told Business Insider.
  • The Food and Drink Federation, National Farmers Union, and Freight Transport Association all called on the government to negotiate as close ties with the EU as possible.
  • Visit Business Insider's homepage for more stories.

Some of Britain's biggest business groups are urging Boris Johnson to abandon his policy of threatening to walk away from the European Union without a trade deal, warning that it would unleash economic chaos costing billions of pounds.

Prime Minister Johnson this week said the United Kingdom would pursue a relationship with the EU "like Australia's" if Brussels refused to agree to its demands by the end of 2020.

However, Australia does not have a free trade deal with the EU, and does relatively little trade with the bloc, compared to the UK. The trade Australia does do with Brussels is largely on World Trade Organisation terms.

Figures from several key industries this week told Business Insider that trading with the EU without a free trade agreement, as laid out by Johnson this week, would cause severe damage to businesses nationwide. 

Dominic Goudie, the Food and Drink Federation's Head of International Trade, said "calling it an Australia approach is fairly meaningless," as such an arrangement "would have very little of substance that would do anything to help food and drink businesses."

Goudie said: "We know that reverting to most favoured nation tariffs would be disastrous for food and drink.

"We export something like £13 billion each year to the EU, and reverting to the most favoured nation tariffs would destroy a very large share of those exports. It's a bad deal for us and it's a bad deal for our industry in Europe."

Nick von Westenholz, the National Farmers' Union's director of Brexit and trade, echoed the Food & Drink Federation, describing what Prime Minister Johnson dubbed a deal "like Australia's" as "pretty much no deal."

Von Westenholz said imitating Australia's trading relationship with the EU would impose tariffs on swathes of Britain's agricultural exports to EU countries, like lamb, wheat, and barley.

"Any kind of tariff barriers, which don't exist at the moment, is going to have an impact. And of course, additional frictions that arise with not having a deal," he told Business Insider.

"The Australians are trying to do a deal with the EU for the very reason that they are not happy with the arrangements they have. We [the NFU] would be pretty unhappy with that outcome."

British business calls on the government to provide clarity

Dover Brexit
BEN STANSALL/AFP via Getty Images

Pauline Bastidon, Head of European & Global Policy at the Freight Transport Association, said the UK logistics industry was "very disappointed, not a little bit disappointed" by the government's approach to EU trade after Brexit.

She told Business Insider that the logistics sector, which transports goods across the border, urgently needed specific details from the UK government on what to expect in January 2021, so it could begin preparing as soon as possible.

"We need the government to spell it out and say in no uncertain words yes this is going to continue, or no this isn't going to continue," Bastion said, using the example of questions marks over how and where agricultural goods crossing the border will be checked in eleven month's time.

"Where are the border inspection posts? There are none at Eurotunnel.

"Even where are some at other parts, do they have the capacity to deal with the increased volume? Are we going to provide training and support? How are going to help the industry get there?" she said.

"It's all very well and good saying 'are you ready? are you ready?' as they [the UK government] constantly do, but we need absolute clarity at an operational level and we need concrete measures."

The government this week stepped up planning for life outside of the EU, announcing a month-long consultation for businesses to submit their views on what the UK should prioritise in trade talks with Brussels and other countries.

The announcement was welcomed by business leaders, who are keen to have as much say in the government's trading objectives as possible. The UK is set to begin negotiating with the EU and countries like the US in the next few weeks.

However, The Food and Drink Federation's Dominic Goudie is concerned that changes to how the UK food and drink industry trades will not be confirmed until later this year, leaving companies just weeks — or even days — to adapt.

"Food and drink is ultimately the last thing which was agreed in every trade agreement I've worked on or looked at over the 10 or 11 years I've been working in the industry," he said.

"And that means we could end up in a situation where at the end of December, we only find out then the things which need to change and will have to be implemented immediately."

"It's essential that we don't go into this thinking any changes have to take place on January 1. We need to be flexible and the EU needs to be equally flexible to allow time for businesses to implement these changes."

Our Brexit Insider Facebook group is the best place for up-to-date news and analysis about Britain’s departure from the EU, direct from Business Insider’s political reporters. Join here.