LONDON – Britain will not pursue any trade relationship with the European Union that relies on the country aligning with EU laws, Prime Minister Rishi Sunak told a gathering of business leaders on Monday.

“On trade, let me be unequivocal about this: Under my leadership, the United Kingdom will not pursue any relationship with Europe that relies on alignment with EU laws,” Mr Sunak said, responding to a question by a reporter about Britain’s trade and migration relationship with Europe.

He said Britain’s exit from the EU had helped bring more freedom on matters like migration and regulation and had secured “proper control” of the country’s borders.

“We need regulatory regimes that are fit for the future, that ensure that this country can be leaders in those industries that are going to create the jobs and the growth of the future. And having the regulatory freedom to do that is an important opportunity of Brexit,” he told the Confederation of British Industry’s (CBI) annual conference.

His remarks came after a newspaper reported that his government was pursuing closer ties with the EU.

He is under pressure to ease economic tensions with the bloc and let more skilled workers into Britain to address the country’s economic problems. 

CBI director-general Tony Danker earlier urged Mr Sunak to settle a dispute with the EU over trade between Britain and Northern Ireland to unlock more opportunities for trade and to ease immigration restrictions that are adding to the cost-of-living crisis.

“We have an immigration system that is far too nervous about bringing in the skills we need,” Mr Danker said in an interview with Bloomberg.

He argued that the shortage of workers is adding to the “stagflation” pressures in Britain’s economy. 

When asked about the prospect on Monday, Mr Sunak said his priority is tackling illegal migration, but he also wants Britain to be a “beacon for the best and brightest”.

Managing the post-Brexit relationship with the EU is a sensitive issue for Mr Sunak, given ongoing deep divisions within his ruling Conservative Party over the topic.

Downing Street denied a report in Britain’s Sunday Times that the country is considering pushing for a Swiss-style relationship with the EU, an idea that had angered Brexit hardliners. 

Former Cabinet minister Simon Clarke said on Twitter he hoped that was not under consideration, and former UK Independence Party leader Nigel Farage said “this level of betrayal will never be forgiven”.

Mr Danker said the government should avoid opening up the broader debate over Brexit and focus on potential benefits from the existing deal, such as partnerships in science and mutual recognition of professional qualifications. Those initiatives are being held up by the dispute over Northern Ireland.

“Forget about the Swiss deal. We just want the Boris Johnson Brexit deal to be implemented and that is not happening right now because of the Northern Ireland Protocol,” he said, referring to the former prime minister.

Switzerland is a member of the European Free Trade Association, which, thanks to about 120 bilateral accords, participates in the single market for most goods. But it also has to accept free movement of labour and EU market regulations and makes annual payments to the bloc’s budget – all of which are red lines to hardline Brexiteers on the right of Mr Sunak’s Conservative Party.

Trade hit

The pushback shows the bind Mr Sunak is in as he and Chancellor of the Exchequer Jeremy Hunt seek to boost Britain’s economy, which Mr Hunt said last week is already in a recession that is predicted to last through 2023.

Mr Hunt last Thursday unveiled a £55 billion (S$90 billion) package of tax rises and spending cuts as he sought to restore the confidence of markets in the economy two months after former prime minister Liz Truss’ disastrous plan for £45 billion of unfunded tax cuts.

The government’s fiscal watchdog, the Office for Budget Responsibility, estimates that Brexit will lower Britain’s trade intensity by 15 per cent over the longer term.

This is despite promises from those who campaigned for the divorce that it would allow the country to become a more agile trading nation.

Instead, British businesses trading with Europe have faced extra red tape.

Meanwhile, Britain is still in a stand-off with the bloc over trading arrangements with Northern Ireland, which still follows EU rules.

While a Swiss-style deal would ease those tensions, the British government issued a statement on Sunday calling the Times report “categorically untrue”. 

“This government is focused on using our Brexit freedoms to create opportunities that drive growth and strengthen our economy,” the statement said. 

Health and Social Care Secretary Steve Barclay, a former Brexit secretary, told BBC TV on Sunday that a Swiss-style deal is not on the cards “and I certainly don’t recognise that story”.

Mending fences

Nevertheless, there are signs Mr Sunak’s administration is trying to repair the fractious relationship with the EU that prevailed under Mr Johnson, who negotiated the Brexit deal, and his short-lived successor, Ms Truss, who promoted legislation to unilaterally break with the so-called Northern Ireland Protocol governing the region’s trade. 

The European Commission told members last week that relations with London have improved under Mr Sunak, though that has not yet translated into concrete changes in British positions on Northern Ireland.

“Having unfettered trade with our neighbours and countries all over the world is very beneficial to growth,” Mr Hunt told BBC Radio last Friday, adding that in the years ahead, Britain will be “able to remove the vast majority of the trade barriers that exist between us and the EU” while remaining outside the single market. BLOOMBERG, REUTERS