Confederation of British Industry director-general Carolyn Fairbairn. Picture: REUTERS/TOBY MELVILLE
Confederation of British Industry director-general Carolyn Fairbairn. Picture: REUTERS/TOBY MELVILLE

London — Britain’s finance minister and business chiefs have urged the country to avoid a “no deal” Brexit after another crushing parliamentary defeat for Prime Minister Theresa May over her EU-divorce deal with Brussels.

The fast-moving Brexit saga eclipsed the government’s budget update that slashed the 2019 economic growth forecast, with the UK economy also hit by China’s slowdown and trade war tensions.

MPs will decide on Wednesday whether the country should leave the EU without a deal, with analysts expecting parliament instead to favour delaying its departure beyond the March 29 exit date, in a further vote due on Thursday.

Britain’s economy is expected to grow by just 1.2% this year, down sharply from prior guidance of 1.6%, finance minister Philip Hammond revealed in his budget update.

The downgrade, widely expected after a similar move by the Bank of England, came one day after parliament overwhelmingly rejected May’s draft Brexit divorce agreement.

“The vote on Tuesday night vote leaves a cloud of uncertainty hanging over our economy and ... our most urgent task in this house is to lift that uncertainty,” the chancellor said in a budget thin on policy announcements.

“Leaving with ‘no deal’ would mean significant disruption in the short and medium term, and a smaller, less prosperous economy in the long term than if we leave with a deal — higher unemployment, lower wages, higher prices in the shops.

“That is not what the British people voted for in June 2016” in the referendum to leave the EU, the chancellor said.

Earlier, Carolyn Fairbairn, director-general of Britain’s biggest employers’ organisation, the Confederation of British Industry, slammed the politicians’ handling of Brexit.

“It’s time for parliament to stop this circus,” said Fairbairn after MPs rejected May’s divorce deal for the second time.

May needed to extend the Article 50 deadline for withdrawal from the bloc to allow sufficient time for an acceptable deal, she added.

“A new approach is needed by all parties. Jobs and livelihoods depend on it. Extending Article 50 to close the door on a March no-deal is now urgent.”

The British Chambers of Commerce, which represents thousands of firms, also insisted a no-deal exit had to be avoided. They too voiced anger that politicians were still grappling with implementation of the 2016 referendum result, issuing a stinging rebuke to Hammond’s Conservative Party, traditionally regarded as a big supporter of private enterprise.

“The government must now urgently set out in concrete terms what it will do to avoid the damage that a messy and disorderly exit on March 29 would cause to businesses, communities, and the UK economy,” the Chambers of Commerce said.

In a bid to soothe fears of a chaotic departure, May’s government on Wednesday said it would temporarily slash most import tariffs in the event of a no-deal Brexit.

Britain also vowed not to apply customs checks on the border with Ireland, albeit temporarily.

The new tariffs regime is aimed at avoiding both a jump in prices of EU imports for consumers and any disruption of supply chains. It is intended to last up to one year pending negotiations on a more permanent system.

Under the proposal, 87% of imports into Britain will be eligible for zero tariffs, compared with the current level of 80%. But the tariffs pledge also drew an angry response from business leaders.

“These are being imposed on this country with no consultation with business with no time to prepare,” Fairbairn told BBC radio. And the BCC lambasted the “abrupt” move as an “unwelcome shock” for many businesses.

In the auto sector, the government said carmakers reliant on EU supply chains would not face tariffs for imported parts used to make vehicles in Britain.

That news failed to convince UK car industry body the Society of Motor Manufacturers and Traders. It said a “no-deal” would spark disruption and job losses in a sector already plagued by collapsing demand for high-polluting diesel vehicles.

Japanese carmakers Honda and Nissan have both recently decided to slash investment in Britain, partly owing to turmoil created by a possible no-deal Brexit.

AFP