Chancellor Sajid Javid has moved to stem business alarm over the government’s determination to avoid alignment with EU rules and standards after Brexit by declaring that the UK will not “diverge for the sake of it”.
The comment, in a speech to the CBI in Davos, marked a retreat from his insistence in a weekend interview that there would be no alignment and businesses would have to “adjust”.
His remarks to the Financial Times sparked concern among businesses in key sectors like car manufacturing and agriculture, who fear that breaking away from EU rules will mean costly delays which would force prices up for consumers.
At the weekend, Mr Javid took a hard line on divergence, telling the FT: “There will not be alignment, we will not be a rule-taker, we will not be in the single market and we will not be in the customs union — and we will do this by the end of the year.”
His comments prompted the CBI director general Carolyn Fairbairn to caution that alignment “supports jobs and competitiveness” for many firms in the most deprived parts of the UK and urge the government “not to treat this right as an obligation to diverge”.
The British Chambers of Commerce also warned that “uncertainty around the extent of divergence risks firms moving their production elsewhere”.
The chancellor sought to reassure his business audience in Davos, telling them: “We will be a sovereign and independent country, not a rule-taker.
“But we’ll always protect the interests of British businesses throughout this process. And we’ll maintain high standards – not because we are told to; but because we want to. It’s what the British people want.”
He continued – in remarks not included in copies of his text distributed by the Treasury: “That doesn’t mean we will diverge for the sake of it.”
Divergence from EU rules is a prized goal for some Brexiteers, who believe that stripping back environmental and workplace safeguards will make UK firms more competitive and permit ambitious trade deals with countries like the US whose own domestic regulations are less stringent than those applied in Europe.
But businesses are concerned that any variation between rules on either side of the new UK/EU border will mean additional bureaucracy and disrupt supply chains, and may require different products to be produced for the two markets.