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May open to transitional deal to avoid ‘cliff edge’ Brexit
Prime minister seeks to calm business fears over damaging exit from EU
Is Hammond too gloomy about Brexit? [/paste:font]24 minutes ago
Theresa May addresses the CBI conference on Monday © EPA
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Jim Pickard and George Parker
Theresa May has told business leaders she is open to striking a transitional deal on leaving the EU rather than a “cliff edge”
Brexit that could damage the UK economy.
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Speaking to the CBI employers’ group conference on Monday, the prime minister also backed away from one of her pledges on corporate governance, saying she would not make it mandatory to have
workers sitting on company boards.
Fears of a
“cliff edge” Brexit have been raised repeatedly by business leaders, who want an interim deal to let them keep trading as before once the UK has left the EU. Paul Drechsler, president of the CBI, who spoke just before Mrs May, warned that companies could find themselves stranded in a regulatory no-man’s-land on the day after Brexit.
“For many firms it’s not about a ‘hard’ or ‘soft’ Brexit, but a ‘smooth’ Brexit, which avoids these cliff edge problems,” he told delegates. They feared a sudden and overnight transformation in their trading conditions, he added.
Mrs May indicated she was responsive to such calls. “People don’t want a cliff edge, they want to know how things are going to go forward,” she said during a question-and-answer session after her speech.
The prime minister’s spokeswoman said Mrs May was “reflecting views that she has already expressed about how we seek the best deal for the UK and provide certainty for people and businesses”.
In her speech in Mayfair, the prime minister set out the terms of a new “grand bargain” with business, where the government invests to boost productivity and cuts corporation tax in exchange for help in tackling the worst excesses of capitalism.
For many firms it’s not about a ‘hard’ or ‘soft’ Brexit, but a ‘smooth’ Brexit, which avoids these cliff edge problems
Paul Drechsler, CBI president
The various carrots for business will include a real-terms increase in government spending on research and development, a new Industrial Strategy Challenge Fund and a review of the R&D credit to make it more effective.
At the same time the prime minister said she was still committed to establishing the best corporate governance of any major economy in the world and stopping executives from “gaming the system”.
“We all know that in recent years the reputation of business as a whole has been bruised. Trust in business runs at just 35 per cent among those in the lowest income brackets,” she said. “The behaviour of a limited few has damaged the reputation of the many. And fair or not, it is clear that something has to change.”
When Mrs May entered Number 10 she set out plans to shake up Britain’s boards, including binding annual votes on executive pay and the publication of pay ratios between the highest and lowest paid.
All of this will still be laid out in a green paper later in the year, she told the employers’ group on Monday morning, as part of an attempt to shake up a business community “bruised” by the actions of an irresponsible minority.
Yet on one of the most contentious points — workers on boards — she has now publicly backtracked, saying the policy will stop short of the direct appointment of workers or trade union representatives on boards.
The plan was set out in the summer and repeated as recently as October when Mrs May said she wanted “not just consumers represented on company boards but workers as well”. But several cabinet ministers, including Greg Clark, business secretary, were hostile towards the proposals, while company executives saw it as an unwelcome imposition at an already fraught time.
On Monday Mrs May finally ruled out direct representation and also said there would not be German-style binary boards: “Our unitary board system has served us well and will continue to do so,” she said. Instead, workers’ voices would be heard through other less contentious routes, such as advisory councils or panels.
Carolyn Fairbairn, CBI director-general, said businesses recognised the public’s concerns, adding that the challenge “is to take the great practice that we see in so many places and apply it everywhere, eradicating the unacceptable transgressions that some companies do make”.
Ms Fairbairn also welcomed Mrs May’s comments on a transitional EU deal. “With only two years for such a complex negotiation, the government rightly has on its radar that we should seek a smooth transition which gives firms time to adapt,” she said.
Earlier the prime minister had proposed in the FT a pact with corporate Britain to work together to defend capitalism, free markets and free trade from populist attacks. She promised to support business with a new industrial strategy that would include an extra £2bn a year by 2020 to support research and development. Mrs May said she wanted the UK to become the world’s “go-to place for scientists, innovators and tech investors”.
Philip Hammond, the chancellor, will present his first Autumn Statement this week and will announce more investment in road improvements, while Mrs May told the CBI that the government would support innovation through the tax system and deliver the “lowest corporation rate in the G20”.
Corporation tax is already due to come down to 17 per cent in 2020 — the lowest rate in the G20 — but Mrs May’s allies said Britain could drop the rate to 15 per cent if Donald Trump fulfilled his promise to cut US business tax to that level.
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