Business feels it has been ignored for much of the past year. Now it is fighting back

IT HAS been a dispiriting year for many British businesspeople. Most voted to remain in the EU in last year’s referendum. They accepted defeat, but then looked on in horror as Theresa May, the new prime minister, veered towards an extreme form of hard Brexit, promising to leave the single market and customs union and to impose harsh migration restrictions.

This has been accompanied by a ceaseless flow of vitriol from politicians on all sides, triggered in part by the controversial bankruptcy of BHS, a retailer, last year. During the election campaign Labour and the Conservatives, usually the pro-business party, seemed to vie to outdo each other in their anti-business rhetoric.

Now the fightback has begun. Sensing the opportunity presented by a humbled Mrs May and a weakened post-election Tory government, business has come out more forcefully against a hard Brexit. “We have become emboldened,” says Terry Scuoler, head of the EEF, a manufacturers’ organisation. “It’s time to change the tone,” suggests Carolyn Fairbairn, head of the Confederation of British Industry (CBI), the main employers’ organisation.

In almost unprecedented language, Britain’s business lobbies are arguing that their concerns, and those of the wider economy, should be put at the heart of the Brexit negotiations. In 1980, the then head of the CBI promised a “bare-knuckle fight” against the government of Margaret Thatcher over monetarism and interest rates. Mrs May now faces another bare-knuckle fight with business over Brexit.

The pugilism began on June 18th, when the five main business organisations signed a joint letter arguing for their vision of Brexit, one that looks very different from the government’s. The CBI, the Institute of Directors, the EEF, the Federation of Small Businesses and the British Chambers of Commerce all want to retain tariff-free goods trade, maintain “minimal customs formalities” at the borders as well as regulatory equivalence, have a “flexible system for the movement of labour and skills” between Britain and Europe (with no target numbers), preserve participation in pan-European agencies, and more. They also want a robust transitional deal that will “maintain the economic benefits of the single market and the customs union”.

Fleshing out this agenda on June 20th, with chilling warnings over how bad it would be if these demands are not met, was the car industry, which supports over 800,000 jobs. At the annual jamboree of the Society of Motor Manufacturers and Traders, Mike Hawes, the chief executive, said that a future trade deal with the EU should incorporate as many of the advantages Britain currently enjoys as possible, which means being “open” and flexible on the customs union in particular.

Reporting another year of record car production and exports, Mr Hawes said “it’s time to be brutally honest—our sector needs a comprehensive and bespoke trade agreement.” And, arguing that the Brexit negotiations cannot be completed within two years, he added that a transitional arrangement, maintaining both single-market and customs-union membership, was essential. The alternative, the proverbial cliff-edge, “would damage our industry permanently”.

Ian Howells, senior vice-president of Honda, was on hand to explain how important the customs union and frictionless borders are to Britain’s highly integrated, multinational car industry. The Honda plant at Swindon, operating a just-in-time production system, takes in 350 lorries a day delivering about 2m parts for assembly, almost all of them from the EU. As the plant can hold only about a day’s worth of parts, hold-ups in the supply chain would be very disruptive. And Mr Howells warns that, although a company like Honda has deep enough pockets eventually to adapt to whatever trading environment Brexit produces, that is not true of the myriad of small firms that make up the industry’s British supply chain.

Politically, the business case for a softer Brexit probably has more allies now than before the election. Mr Scuoler says the business secretary, Greg Clark, was “aware of the joint letter and fully behind it. The dynamic in government has changed, which should point to some flexibility around the free movement of labour.” Business is also encouraged by recent interventions by the chancellor, Philip Hammond. The Labour Party too is talking of a “jobs-first Brexit”, and the Liberal Democrats want the softest of Brexits anyway.

To keep the momentum up, business is seeking a more formal role in the Brexit negotiations. Business organisations propose a standing committee, where business representatives can feed into the negotiations and review what is on the table, with separate working groups looking at issues such as the free movement of labour. Such a structure has worked well in Canada and Australia, says Ms Fairbairn.

Perhaps a first sign of success in the business fightback was this week’s Queen’s Speech, which at least acknowledged the value of enterprise. The Institute of Directors welcomed its “change of tone”. But there is a long way to go before business gets more positive about Brexit.