Brexit Latest: Theresa May rules out customs union for UK

Theresa May has categorically said the UK will leave the customs union as part of Brexit.
Theresa May has categorically said the UK will leave the customs union as part of Brexit.
Join today View market

Theresa May has said the UK will leave the customs union as part of any Brexit deal with the EU. The Tradefair team brings you the latest in US politics...

"It is very difficult to see how being in a customs union is compatible with having an independent trade policy because we would therefore be dependent on what the EU negotiated in terms of its trading policies and we’d be following behind that.”

- Liam Fox, Trade Secretary

Theresa May has definitively said that the UK will not remain part of the EU's custom union after Brexit.

After months of debate about what would be best for businesses, the Prime Minister "categorically" ruled it out. It's likely that May hopes this will bring some certainty to the process and encourage Cabinet members to come together.

A senior government source told Business Insider: "To put this to rest, we are categorically leaving the customs union. It is not our policy to stay in the customs union. It is not our policy to stay in a customs union."

Bringing unity to the Cabinet?

However, May's Cabinet have long been split on the issue and haven't been particularly concerned about opposing her.

Foreign Secretary Boris Johnson has been one of the most public figures to go against the Conservative leader, suggesting his own approach to Brexit, which included leaving the customs union completely.

While at the World Economic Forum in Davos last month, Chancellor Philip Hammond told delegates that the UK was only seeking "very modest" changes from Brexit.

But Trade Secretary Liam Fox told Bloomberg: "It is very difficult to see how being in a customs union is compatible with having an independent trade policy because we would therefore be dependent on what the EU negotiated in terms of its trading policies and we'd be following behind that."

"We have to be outside of that to take advantage of those growing markets. One of the reasons we are leaving the European Union is to take control and that's not possible with a common external tariff," he said.

What will it mean for businesses?

Although the move to abandon this element of the EU may get Johnson and Fox on side, there are many more Cabinet members who are concerned about how businesses would be affected. They want clarity on whether UK firms will be allowed to trade freely throughout the EU, while others want Britain to be able to sign free trade deals with countries across the world.

This continued lack of certainty on trade is likely to add a huge element of risk for investors. Not knowing how Brexit will impact businesses could prove detrimental for the markets, especially as other regions like the US are performing stronger than ever.

Many major business experts have backed staying in the customs union for the degree of stability it would bring businesses but any form of Brexit will still have a considerable impact on the UK's economy.

This could be provide further evidence for investors that moving away from the customs union will cause economic problems.

Even if Britain remained part of the customs union, its ability to negotiate strong trade deals could be limited. However, one of the major concerns is how leaving will affect the matter of the Irish border.

'Ideologically-driven madness'?

Keeping one foot in the customs union would reduce the need for border inspections and paperwork but not completely, as the EU would still need to check what goods were being passed over.

With the Prime Minister moving to abandon the customs union, UK businesses are likely to get nervous and will be crying out for answers. Most importantly, they'll want to know what will replace the customs union and how they can safeguard their organizations.

Michael Russell, Brexit Minister for the Scottish government, accused May of "ideologically-driven madness".

In a tweet, he said: "Complete ideologically driven madness which cannot but do substantial lasting harm as May will know from the @GovUk assessments she is trying to hide."

Last month, leaked government forecasts predicted that the UK could lose between 2% and 8% in growth over 15 years if it leaves the customs union and single market, depending on what model it adopted.

What is Tradefair?

Tradefair is Betfair's new spread betting service, offering trading on thousands of financial markets such as Gold, EUR/USD, FTSE 100 and Twitter. Whether you think prices are going up or down, Tradefair lets you take a view.

Check out our latest Special Offers

Please note: Our services include products that are traded on margin and carry a risk that you can lose more than your initial deposit. The products may not be suitable for everyone - ensure you fully understand the risks involved.

Join today View market

Discover the latest articles