UK now ‘teetering on brink of trade war with EU’, warn London business leaders

Business chiefs in London warned on Tuesday that Britain is now “teetering on the brink of a trade war” with the EU which will damage firms in the capital and beyond.

They raised the alarm of “further economic pain” and “falls in investment” after the Government unveiled its deeply controversial Northern Ireland Bill.

It threatens to unilaterally tear up the protocol signed by Boris Johnson with Brussels in January 2020 to ram through Brexit.

Richard Burge, chief executive of the London Chamber of Commerce and Industry, said: “We are hugely concerned that the introduction of the Government’s Northern Ireland Bill risks significant harm to businesses in London and right across the whole of the UK.

“Getting Brexit done was at least meant to deliver certainty to businesses after years of waiting for clarity on the future of the UK’s trade relations with the European Union.

“The introduction of this bill means we are now teetering on the brink of a trade war with the EU and that will mean further economic pain and falls in investment.”

His warning came after the Centre for European Reform think tank estimated that Brexit has already dealt a £31 billion blow to Britain’s economy.

The Treasury is refusing or unable to publicly put any figures on the harm being caused by quitting the European bloc.

Mr Burge also highlighted a forecast by the Organisation for Economic Development and Co-operation that the UK’s economy will grind to a halt next year and be the worse performing of G7 nations (the US, UK, Germany, France, Japan, Italy and Canada).

He added: “While the protection of the UK internal market is important, it is equally as important to have macroeconomic stability, especially during this cost of living and cost of doing business crises.

“We urge the Government to carefully consider the impact that playing politics with the Protocol could have on the British economy.”

The new legislation creates a framework to allow ministers at Westminster to introduce changes in four areas covering customs and agri-food safety checks, regulation, subsidy controls and the role of the European Court of Justice.

The UK Government insists the Bill is compatible with international law under the “doctrine of necessity” which allows obligations in treaties to be set aside under “certain, very exceptional, limited conditions”.

But Ireland’s premier Micheal Martin said “it’s very regrettable for a country like the UK to renege on an international treaty”, adding: “It represents a new low point because the natural expectation of democratic countries like ourselves, the UK and all across Europe is that we honour international agreements that we enter into.”

European Commission vice-president Maros Sefcovic said the EU viewed the UK’s actions with “significant concern” and that it would consider what steps to take next.

As well as re-starting infringement proceedings against the UK, he said the EU would also look at launching further legal action to protect the integrity of the EU single market.

He said the access of Northern Ireland businesses to that single market was now “at risk” while the UK’s action had undermined the trust necessary for the operation of its post-Brexit trade deal with Brussels.

“Unilateral action is damaging to mutual trust,” he said.

“Our aim will always be to secure the implementation of the protocol. Our reaction to unilateral action by the UK will reflect that aim and will be proportionate.”

However, Foreign Secretary Liz Truss insisted on Tuesday morning that there is “absolutely no reason” why the EU should be angered by the controversial plans to override the Northern Ireland Protocol.

She told Times Radio: “Our solution doesn’t make the EU any worse off. We continue to protect the single market, we’re supplying the EU with data, we’ve got strong enforcement to make sure companies aren’t violating the rules.

“So there is absolutely no reason why the EU should react in a negative way to what we’re doing.”

Boris Johnson signed the Northern Ireland Protocol with the European Union in January 2020 as part of the Brexit divorce settlement, with the measures aimed at preventing a hard border on the island of Ireland.

But by imposing checks on goods crossing the Irish Sea from Great Britain, the protocol has fuelled unionist anger in Northern Ireland and is also opposed by Eurosceptics in Mr Johnson’s Conservative Party.

The new bill will give ministers powers to unilaterally override elements of the protocol, which some legal experts say would be a breach of international law.

It will enable ministers to establish a “green lane” so trusted traders are allowed to move goods from Great Britain to Northern Ireland without checks, as long as the products remain within the UK.

Goods supplied by firms outside the trusted trader scheme, or products destined for Ireland and the EU, would go through a red lane and face checks.

Products being placed on the market in Northern Ireland would be allowed to follow either UK or EU regulations, rather than having to comply with Brussels’ rules.

Changes would also allow Northern Ireland to be included in UK Government state aid schemes and tax changes - for example the UK has complained that VAT relief on energy-saving materials could not be extended across the Irish Sea while changes to the alcohol duty regime are also prevented from applying in Northern Ireland.

The fourth area where changes are envisaged is the governance of the arrangements and the role of the European Court of Justice (ECJ).

The plan would mean that UK courts are responsible for the operation of the new regime, but matters of EU law could still be referred to the ECJ.

The UK also proposes removing the ECJ as a final arbiter in trade disputes over the protocol, with the function instead handed to independent adjudicators.

The UK Government’s position has been opposed by 52 of the 90 MLAs in the Stormont assembly, with politicians representing Sinn Fein, the SDLP and the Alliance Party condemning the “reckless” plan.