Tue. Nov 29th, 2022

Rishi Sunak drew a red line on any new attempts to improve trade with the EU after Brexit and managed to quell a rebellion among angry Tories – but kept open the possibility of closer ties with Brussels.

The Prime Minister dismissed suggestions the UK could pursue a Swiss-style relationship with the bloc, while a senior business leader called the row a “sideshow” and No 10 sources pointed the finger at Chancellor Jeremy Hunt.

Speaking about the noise for the first time, Sunak highlighted his pro-Brexit credentials as someone who backed Leave in the 2016 referendum and spoke of the need to unleash the “enormous benefits and opportunities” of being outside the EU.

“Under my leadership, the UK will not take on any relationship with Europe that relies on alignment with EU law,” he promised in a speech to the Confederation of British Industry (CBI) in Birmingham on Monday.

Sunak said the “regulatory freedom” to deviate from EU standards was a key asset and insisted it would not be sacrificed in any future talks to try to break down trade barriers with Brussels.

He did not dispute suggestions previously made by Hunt that the UK should “remove the vast majority of trade barriers that exist between us and the EU” while remaining outside the single market.

Number 10 later said the pair “absolutely” agreed on Brexit policy and confirmed that ending freedom of movement and “unnecessary payments” to the EU, as well as retaining the UK’s ability to strike trade deals, were also red lines.

Keir Starmer, the Labor leader, will tell business leaders that the days of “low wages and cheap labour” must end in his address to the CBI on Tuesday.

He is expected to promise to be “pragmatic” about the labor shortage and not ignore the need for skilled migrants, but will stress that any changes to the points-based migration system “will come with new business conditions”.

“We will expect you to put forward a clear plan for more skills and more training, for better pay and conditions, for investment in new technology,” Starmer will say.

In a sign of Sunak’s success in quelling the rebellion that grew over the weekend, Britain’s former Brexit negotiator, David Frost, said his speech on Monday was a “welcome and encouraging” response.

But an ERG member warned there “can be no backsliding” and a senior Foreign Office source said the government was “not interested in Swiss-style, dynamic matching, Checkers II or any other arrangement that does not respect parliamentary sovereignty in fact and the law”.

Downing Street insiders pointed the finger at the chancellor for making the rabbits run. One said: “Everyone is blaming Hunt for speaking to the Sunday Times. But there’s really nothing we can do about it, other than keep a close eye on it.”

Andy Street, the Tory mayor of the West Midlands, said his region had one of the highest export earnings. “While we are doing what has been said – increasing our exports to countries outside the EU – there is no doubt that we need the easiest possible way to export to what was clearly our biggest market,” he told the Guardian.

Trade experts said only limited improvements in the flow of goods and services between the UK and the EU were possible given Sunak’s statement.

Professor Anand Menon, of the UK in Changing Europe think tank, said: “We’re going with the explicit knowledge that this is hurting the economy, but there’s nothing we can do to fix it without looking like we’re issuing a ‘takeover’.”

Switzerland’s relationship with the EU is complicated and the result of many overlapping sectoral deals, so Brussels “would not want to emulate it”, Menon said.

He added that while progress on the Northern Ireland protocol would be significant, any changes to the UK’s existing trade deal with Brussels would “make very little difference in macroeconomic terms”.

Jill Rutter, a senior fellow at the Institute for Government, said the UK could try to push the EU to streamline customs processes or tackle the “asymmetry” of border controls, but warned that any perceived “scrutiny” would be resisted by Brussels.

The CBI chief urged Sunak to focus instead on resolving the dispute over the Northern Ireland protocol.

“I think the Swiss thing is a complete sideshow,” said CEO Tony Danker. “It took them 40 years for Switzerland to establish this kind of relationship. We did not implement Boris’s Brexit.”

Asked what he had to say about progress so far, Danker said: “I don’t think we’re getting very far. We need to sort out Northern Ireland.

“I think the Europeans, from my conversations, those I talk to, say that when there is an intention to resolve the protocol on Northern Ireland and there is good will on both sides on that issue, then everything else comes into play.”

Despite Danker’s call for Sunak to be pragmatic about the help an increase in foreign workers could provide, the prime minister said he first wanted to focus on rebuilding public confidence in the immigration system given the number of people being smuggled across the Channel.

Sunak also used his speech to praise automation and robotics investments as a way to spur growth and raise wages. He said the NHS could be one area to see “radical” innovation.

He cited examples of doctors training with virtual reality headsets, robots assisting with surgeries and drones transporting prescription drugs to people living in rural areas as ways robotics is already making a difference in health services.