UK business leaders have united to urge David Davis to quickly establish a Brexit transition deal that mirrors existing arrangements or risk losing British jobs and investment.

In a letter to the Brexit secretary seen by the Guardian, five of the UK’s biggest business lobby groups said time was running out for the government to strike a transition deal before firms start to rein in spending plans as they finalise budgets for 2018 and prepare to implement contingency plans for Britain’s departure from the EU.

Q&A What are the two phases of the Brexit talks? Show The EU27’s negotiating guidelines for the two-year Brexit talks stipulate that they must take place in two phases: separation and “orderly withdrawal”, followed by future relationship. Only when the EU27 decide “sufficient progress” has been made on phase one can phase two begin.

Broadly, phase one is about providing “clarity and certainty” to people and businesses on Brexit’s consequences and agreeing a sum covering the commitments the UK made as an EU member: avoiding a legal vacuum, protecting citizens’ rights, solving the Irish border, and reaching a financial settlement. Phase two of the talks will then focus on agreeing the “framework” of the future trading relationship between the UK and the EU. A transition period can also be agreed as part of this second stage, but the detail of the future relationship can only be worked out once the UK has left. Britain wants to move to stage two fast, but in order to keep as much leverage as possible in talks on the future relationship aims to delay agreeing the financial settlement as long as possible. The EU27 are adamant that all phase one issues must be addressed to their satisfaction before any talk of the future relationship.

“We need agreement of transitional arrangements as soon as possible, as without urgent agreement many companies have serious decisions about investment and contingency plans to take at the start of 2018,” the business groups wrote.

“Failure to agree a transition period of at least two years could have wide-reaching and damaging consequences for investment and trade, as firms review their investment plans and business strategies.”

The joint intervention is a sign of the mounting anxiety among UK businesses about the lack of progress in Brexit negotiations, almost seven months after the prime minister, Theresa May, triggered article 50.

Insiders said business groups wanted to present a united front in their key priorities for Brexit. The letter follows last week’s meeting of EU leaders in Brussels, where there was a more conciliatory tone but ittle in the way of solid progress. There is still no agreement on transition arrangements after March 2019, when the UK leaves the union, and discussions on a long-term trade deal have not yet begun.

It is understood that in recent days Treasury officials have started asking business groups whether they are preparing to offer their members advice on what to do in the event of no deal.

The CBI and British Chambers of Commerce were among the signatories warning Davis of the potentially dire consequences for the UK economy if he failed to agree a transition period of at least two years with the EU. The bosses of the manufacturing trade body EEF, the Institute of Directors and the Federation of Small Businesses also signed the letter on behalf of their members, who employ millions of UK workers.

They stressed that a transition period before new long-term arrangements came into force should be “matched as closely as possible to the current UK relationship”, to limit disruption to firms.



A spokesperson for the Department for Exiting the European Union said: “The prime minister proposed a strictly time-limited implementation period in her Florence speech and was clear in her article 50 letter that agreeing this principle early in the process would help minimise unnecessary disruption to businesses in both the UK and the EU.

“We are making real and tangible progress in a number of vital areas in negotiations. However, many of the issues that remain are linked to the discussions we need to have on our future relationship.

“That is why we are pleased that the EU has now agreed to start internal preparatory discussions on the framework for transitional arrangements as well as our future partnership.”

The letter is the latest in a string of warnings to the government that without an urgent breakthrough in Brexit negotiations, businesses are likely to take jobs and investment elsewhere to avoid as much uncertainty as possible.



Earlier this month, Sam Woods, a deputy governor at the Bank of England, said banks and other City firms would activate their Brexit contingency plans if there was no deal on a transition period by Christmas.

The boss of Goldman Sachs, one of the world’s biggest investment banks, signalled his intention last week to relocate jobs out of the UK to Germany in a provocative tweet while May was at the EU summit, underlining the pressure on her government to protect British jobs.

Lloyd Blankfein said he expected to be “spending a lot more time” in Frankfurt from now on.

Just left Frankfurt. Great meetings, great weather, really enjoyed it. Good, because I'll be spending a lot more time there. #Brexit — Lloyd Blankfein (@lloydblankfein) October 19, 2017

The lobby groups called on the government to publicly state its position on an implementation phase, sending “EU negotiators a strong positive signal of the government’s readiness to discuss this economically crucial issue”.