An agreement between the UK and Europe on a “transition arrangement” after Brexit is vital to secure economic stability, a powerful Commons committee has said.
The deal, which would most likely include remaining in the single market and customs union, and accepting judgments from the European Court of Justice for a period of time, would be a “price worth paying”, said the Treasury select committee.
Nicky Morgan, chair of the committee and a high profile Remainer, said: “An agreement between the UK and EU27 on ‘standstill’ transitional arrangements is now urgent.
“The consequences of failing to reach an agreement are dramatic and damaging.”
She added: “Many businesses will begin to prepare for a ‘no deal’ outcome – moving jobs and activity, and incurring potentially unnecessary expenditure – early next year.
“Transitional arrangements must therefore be straightforward enough to negotiate in a matter of weeks.
“This may well include accepting EU rules beyond those of the single market and customs union and it is likely to involve retaining, on a temporary basis, the jurisdiction of the ECJ, and the direct effect and supremacy of EU law.
“That is a price worth paying for stability and certainty after 30 March 2019.”
Prime minister Theresa May has already raised the hope of agreeing a two-year transition after Brexit day in March 2019.
She used a speech in Florence in September to propose the extension in order to give both sides the chance – but principally the UK – more time to sort through the finer details of adopting EU rules, regulations and laws across business, industry and society.
The remaining 27 members of the bloc will have to agree to the move but it has not be rejected.
The select committee said a transition deal could be followed by a further “adaption period” for some sectors such as financial services.
Donald Tusk, the president of the European Council, said earlier this week that there was now a “furious race against time” to finalise implementation arrangements and the framework for a new free trade deal.
“We are ready to move to the second phase, which will expand discussions to cover transition and the framework for the future relationship,” he said on Monday.
The select committee’s report comes as 11 Tory MPs rebelled against the government on an amendment to the EU Withdrawal Bill delivering Theresa May’s first Commons vote defeat.
MPs will now have vote on whatever terms she manages to secure from Europe on leaving the bloc.