Greg Clark: securing free movement for UK workers in EU is vital

Restricting the ability of British workers to travel within the EU could be as dangerous to the economy as a hard trade border, a leading pro-remain cabinet minister has said, adding that the row over a post-Brexit customs deal risks overshadowing the need for a deal on services.

The business secretary, Greg Clark, said it was vital the debate moved on to the need for seamless movement of workers, given that services accounted for 80% of the UK economy.

“So far ... the debate has focused mainly on goods,” he said. “About how our new customs arrangements with the EU need to keep the borders flowing and avoid costly delays and paperwork. But in order to provide services, it is people who must not be held up.”

Clark said UK businesses had regularly raised the need for the frictionless movement of staff to continue and he had got the message “loud and clear”.

“I completely understand when companies say that they rely on efficient mobility as it currently stands, raising concerns that restricting people’s ability to travel at short notice would be as damaging to our economy as frictions and disruption at our borders,” he told a Liverpool business festival.

Clark, a key ally of the prime minister who sits on her Brexit sub-committee, said fresh trade deals with countries outside the EU would not compensate for new barriers to selling services in Europe.

“We need to recognise that the EU is by far and away the single biggest consumer of our services exports,” he said. About £90bn of services were exported to the EU in 2016, more than the UK’s next eight largest partners combined.

“This extraordinary performance has been built on the back of established trading relationships with the EU,” he said. “As we leave the European Union, we must deliberately set out to maintain these rights and introduce as few new barriers to trade in services as possible. This is every bit as important as avoiding barriers in manufactured goods.”

Debate over the UK’s future customs arrangement, and the consequences for the border between Northern Ireland and the Irish Republic, has dominated proceedings in recent months, with the cabinet disagreeing over two future customs models.

Clark sits on a working group examining the “maximum facilitation” model, where technology would be used on the border to minimise the need for customs checks. He is known to favour the alternative option, a customs partnership, where the UK would collect tariffs on behalf of the EU, eliminating the need for some new border checks.

A customs union is an agreement by a group of countries, such as the EU, to all apply the same tariffs on imported goods from the rest of the world and, typically, eliminate them entirely for trade within the group. By doing this, they can help avoid the need for costly and time-consuming customs checks during trade between members of the union. Asian shipping containers arriving at Felixstowe or Rotterdam, for example, need only pass through customs once before their contents head to markets all over Europe. Lorries passing between Dover and Calais avoid delay entirely.

Customs are not the only checks that count – imports are also scrutinised for conformity with trading standards regulations and security and immigration purposes – but they do play an important role in determining how much friction there is at the border. A strict customs regime at Dover or between Northern Ireland and the Republic of Ireland would lead to delays that will be costly for business and disruptive for travellers. Just-in-time supply chains in industries such as car making could suffer. An Irish peace process built around the principle of entirely unfettered travel between north and south could be jeopardised.

Clark said that for British manufacturers, selling a product such as a Rolls Royce engine was often the beginning of a relationship to provide more profitable services, such as maintenance contracts.

He cited the example of the aircraft manufacturer Airbus, which employs 14,000 people at 25 sites in Britain. Its employees made 18,000 trips to France in 2017, with the company operating an internal shuttle between its site at Broughton and those in Bristol and Toulouse, ferrying about 50 employees a day.

After Clark’s speech, the chief executive of Airbus confirmed it was considering cutting thousands of jobs in the UK as it started to “press the button on crisis actions” over Brexit concerns.

The company said it was considering dropping plans to build aircraft wings in British factories because of concerns that EU regulations would no longer apply from March 2019 and uncertainty over customs procedures, instead moving production to North America, China or elsewhere in the EU.