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UK businesses urge government to seal post-Brexit EU free trade deal

Larry Elliott
Photograph: Gareth Fuller/PA

Business has warned Boris Johnson that he must clinch a free trade deal with the EU after the government released details of the tariffs Britain will impose from the start of next year.

With talks between London and Brussels stalled, employers organisations said they welcomed arrangements that will provide protection for farmers and carmakers but stressed the need for progress in talks with the UK’s biggest trading partner.

Adam Marshall, director general of the British Chambers of Commerce, said said: “While the new tariff regime will provide the government with some leverage in future trade talks, it also demonstrates the importance of reaching a UK-EU agreement to avoid substantial increases in costs for businesses on both sides of the Channel.”

The Department for International Trade said the UK’s new regime would result in 60% of goods coming into the country tariff-free and would result in a similar, bespoke system.

Michael Gove, the Cabinet minister responsible for the free trade talks with the EU, told MPs that a deal was possible but only if Brussels dropped its ideological approach to the talks. In a clear sign that there will be no extension to the transition period designed to smooth the UK’s exit from the EU, the government said the global tariff would be introduced on 1 January.

Under the new regime, the tariffs on more than 6,000 products will be streamlined or simplified, with the aim of cutting costs for businesses and consumers.

The government said it was maintaining tariffs on agriculture – including beef, lamb and poultry farmers – and would maintain a 10% tariff on cars to protect domestic producers from overseas competitors. The UK automotive industry warned last year that operating on World Trade Organization (WTO) terms would cost it £40bn by 2024.

Mike Hawes, chief executive of the society of motor manufacturers and traders said: “Today’s announcement compounds the critical need for the UK to secure free trade agreements, starting with our biggest trading partner, the EU, but also with other key global markets, including the US, Japan and Turkey. The majority of components that help build British vehicles come from overseas, while nine out of every 10 cars bought in the UK are imported – seven of which being from the EU.”

The international trade secretary, Liz Truss, said: “For the first time in 50 years we are able to set our own tariff regime that is tailored to the UK economy.

“Our new global tariff will benefit UK consumers and households by cutting red tape and reducing the cost of thousands of everyday products.

The DIT said the system would ensures that 60% of trade would come into the UK tariff free on WTO terms or through existing preferential access schemes with developing countries from January 2021.

The DIT said the new regime would get rid of some of the complexities of the EU system, would involve rounding down tariffs and would get rid of all tariffs under 2%.

It provided a list of goods that consumers would see come down in price as a result of zero tariffs, ranging from dishwashers to ground thyme.

Stephen Phipson CEO of Make UK, the manufacturer’s organisation said: “Today’s tariff announcement goes some way to providing clarity for business on what a post-Brexit trading environment will look like. At the top level, the announcement does represent a better balance between consumer and producer interests than earlier proposals –to increase the percentage of tariff free products from 47% to 60% (rather than 87% previously).

Tariffs will be cut on more than 100 products in an attempt to encourage the development of a more sustainable economy. These include thermostats and LED lamps.

The temporary zero-tariff rate on products needed to fight Covid-19 – such as ventilators and personal protective equipment (PPE) will be continued beyond 1 January next year if the medical situation makes it necessary, the DIT said.

Goods that will now have zero tariffs, which should come down in price (previous tariff level), include:

  • dishwashers (2.7%);

  • freezers (2.5%);

  • tampons (6.3%);

  • paints (6.5%)

  • screwdrivers (2.7%);

  • mirrors (4%);

  • scissors (4.7%);

  • padlocks (2.7%);

  • baking powder (6.1%)

  • yeast (12%)

  • bay leaves (7%)

  • ground thyme (8.5%)

  • cocoa powder (8%)

  • Christmas trees (2.5%).