European Union (Withdrawal) (No. 6) Bill - Second Reading

Part of the debate – in the House of Lords at 3:38 pm on 5th September 2019.

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Photo of Lord Bilimoria Lord Bilimoria Crossbench 3:38 pm, 5th September 2019

My Lords, the Bill is all about preventing no deal. I remind the House that Parliament made it very clear earlier on this year that it does not want that, yet the Government are still adamant about keeping it on the table. We must not forget that it is Brexit Party policy to have no deal.

In June, I was appointed vice-president of the Confederation of British Industry. While Parliament has been turning itself inside out, something has been lost. Businesses are still struggling with crippling uncertainty, hampering investment and productivity—the uncertainty that the noble Baroness, Lady Neville-Rolfe, spoke about. Let us be clear: no deal would be far worse.

Over the past couple of weeks, the CBI has travelled up and down the country gauging firms’ preparations. Three things have come out of that. First, no deal would not see an end to the Brexit impasse; instead, we would be starting negotiations from a worse position. Secondly, larger firms have already spent billions preparing for no deal but they cannot be protected: they can prepare, but they cannot be protected. Thirdly, we know that smaller firms have neither the time nor the resources to plan properly. I can give the House example after example: a small IT consultancy firm in the north-east is worried that its largest customers in manufacturing, distribution and transport are putting off decisions because of uncertainty. An East Midlands SME with 110 employees is worried about whether or not the current rules will work after 31 October. A manufacturer making specialist materials in the north-west, which currently exports 91% of its products and imports all its raw materials, has made it clear that its profits will suffer greatly and it will be challenged to make investment and grow in the future.

That is why it is important that on both sides, if possible, a compromise and a deal should be brought about. Businesses want certainty. They want the Government to get on and deal with the domestic priorities—some of which were mentioned by the Chancellor, Sajid Javid, in his recent statement, which is all good—but Brexit is still overshadowing everything.

Time and again over the three years I have said it is not only what we think about what is happening with Brexit but what other people around the world think about us. I do not know how many noble Lords saw it but an open letter was published this week. I am going to read part of the letter because it is so important. It says:

“We, the undersigned national business federations from eight countries and representing over four million businesses, are gravely concerned about the possibility of the United Kingdom leaving the European Union without a withdrawal agreement in place.

Companies from our countries have invested”— trillions of pounds—

“in the UK … supporting jobs, growth, and prosperity across the country. We deeply value our economic relationship with the UK given its favorable business climate, characterized by transparency, regulatory stability, respect for the rule of law, and a long-standing commitment to international collaboration.

A decision to leave the EU without a deal would create substantial uncertainty and disruption for businesses, workers, farmers and regulators alike. The prospect of lengthy waits at the border, restrictions on intra-company transfers of workers, the fragmentation of regulations and standards, and doubts about free flow of data and e-commerce represent significant risks … Significant potential changes to the UK’s immigration policy”,

also raise concerns. It continues:

“Firms would be forced to make decisions about supply chains and investments in the UK without knowing what the future terms of trade will be. They will also need to evaluate the legal, contractual and geographic changes needed to ensure their continued ability to serve customers in the UK and across Europe.

Such disruptions are bound to affect jobs, consumer choices, and the cost of goods and services. The UK walking away from its largest trading partner in an abrupt manner also sends concerning signals to trade partners considering bilateral agreements in the future.

We therefore urge the UK and the EU to reach an agreement that includes a meaningful transition period and to swiftly conclude an ambitious agreement regarding their future commercial relationship that supports jobs, growth and prosperity in the UK and across Europe”.

Who are the signatories? They come from across the globe: the Australian Industry Group, the Brazilian National Confederation of Industry, the Canadian Chamber of Commerce, the Federation of Egyptian Industries, the Japan Business Federation, the Federation of Korean Industries, Business New Zealand and the United States Chamber of Commerce. This is what the whole world thinks we should do. It is beyond what experts think, let alone what the CBI has been saying.

I remember clearly that two days before the election in June 2017 I was sitting next to my old sparring partner Michael Gove, the Chancellor of the Duchy—he led the Oxford Union debating team for two years running and I led the Cambridge Union debating team for two years running; we were opponents in the annual varsity debate. I said to him, “Michael, we are in this mess thanks to you”. He said, “Karan, you cannot say that”. I said, “I am saying it, Michael”. He said, “Well, Karan, you will be thanking me in 10 years’ time”.

This was brought to light in an excellent article by Jeremy Warner in the Daily Telegraph. His argument was that no deal would prolong the economic uncertainty, not end it. He started by saying that he has been told repeatedly by his Brexiteer friends, “Don’t worry. If there is any damage, it will all be fine in the long run”. The noble Baroness, Lady Bull, said in her very good speech that it is not just a question of getting Brexit over with. I call a hard, no-deal Brexit the Nike Brexit. Like the sportswear firm, it is saying, “Just Do It”. It is the just-do-it Brexit. Well, we will just do it and then what? Jeremy Warner has said that the idea that getting Brexit over and done with would provide,

“the finality and certainty that everyone so much craves, automatically ushering in a period of economic rebirth, is sadly misguided”.

Jeremy Warner also cited the example of the currency markets. On Tuesday sterling hit its lowest level against the dollar since the 1980s. The main problem is that people around the world are concerned about Britain’s political situation, which they see as toxic. A country that has always been respected for its stability is now seen as being exactly the opposite. Confidence is draining out of our economy. According to Jeremy Warner, economic indicators for the UK are flashing red. The manufacturing Purchasing Managers’ Index reveals economic data which shows that factory output is at its lowest level in seven years. People who are very pro Brexit say, “Europe is going nowhere. Germany is going down the tubes and it is going to have a recession”. That is bad because a declining pound in Germany makes it less competitive for the Germans to export to us, one of their biggest markets. For the UK, while the low pound is great for exports, within the whole concept of the economics of import substitution, you cannot make economic substitutions overnight. You have to build up your capacity, which takes many years. The weakness of the pound as a help to exports is not an instant fillip to the economy or to businesses.

The main point is that as a country we are net importers. If the currency weakens, products on the supermarket shelves become more expensive and consumers suffer. Just as real wages have been showing signs of breaking free after the financial crisis, there is a threat that incomes will sink again. This is not Project Fear. The noble Lord, Lord Rooker, mentioned the Yellowhammer report. We still do not have the full version of that report. I do not know whether a Minister will respond to this debate, but perhaps the noble Baroness can tell us—