LONDON (Parliament Politics Magazine) – The government’s threat of overriding the Northern Ireland protocol is driving businesses to reconsider investing in the UK, weighing down the economy, according to the UK’s leading business lobby group.
The Confederation of British Industry (CBI) argued that rather than political grandstanding, quick discussions with the EU were needed to break the deadlock over the protocol, which controls post-Brexit trade between the EU, Northern Ireland, and the United Kingdom.
Despite fierce criticism from businesses and opposition MPs, as well as the possibility of retaliation from Brussels, Boris Johnson’s administration is preparing to introduce new legislation on Monday that would give ministers the right to repeal parts of the protocol.
The CBI’s director general, Tony Danker, said that achieving an agreement was in the British economy’s best interest, as businesses and consumers grapple with rising living costs and the threat of recession.
He stated that he didn’t believe it was time for grandstanding; he believed it was time to make a deal. He was a firm believer in the Europeans’ inflexibility. At the same time, the UK’s unilateral response measures – which could be announced as early as Monday – were ineffective.
The president of the lobbying group, which represents 190,000 businesses across the UK, said the British economy was suffering as a result of the renewed Brexit uncertainty caused by the protocol conflict. Last week, the Organisation for Economic Co-operation and Development (OECD) forecasted that the United Kingdom will be the second worst performing country in the next year, following Russia.
Right then, they could see multinational businesses shorting the UK, Danker remarked. They looked at the UK and thought that it was a combination of Brexit worries, some of those OECD data, and they could see global corporations thinking: ‘Maybe not the UK to invest in right now.’
Danker, however, believes there is a “quite firm landing zone” for a deal that will please the UK, EU, and Northern Ireland firms.
The protocol as it existed was undercutting the Belfast [Good Friday] accord and power sharing, said a UK government spokesperson.
Their legislation would address the issues. Their desire had always been to settle that through dialogue, but the EU had so far refused to amend the protocol, which was required to give the solutions that Northern Ireland required. The preservation of peace and stability in Northern Ireland had been and would continue to be their focus, they said.
Following a bruising week for Johnson’s personal authority, in which he faced a vote of no confidence from over 40% of his own MPs, the CBI announced a significant growth downgrade for the UK economy in its latest economic estimates.
The lobby group estimated that UK GDP will rise by 3.7 percent this year, down from 5.1 percent as predicted previously and by only 1 percent in the year 2023, revised low from 3 percent before, reflecting a heavy impact to household earnings from the cost of living squeeze.
With less than 40 days until parliament adjourns for the summer, the CBI believes the government should propose steps to help firms cope with rising costs, workforce shortages, and supply-chain bottlenecks.
The CBI’s chief economist, Rain Newton-Smith, said the crisis in Ukraine, Covid, continued supply chain problems, and Brexit had proved to be a toxic combination for UK growth.
Despite an increase in exports in other advanced economies, the CBI predicts a slow recovery in global commerce in the UK, with exports remaining 10% below pre-Covid levels by 2023.
