Ministers admitted last night that Sir Keir Starmer’s ‘reset’ with the European Union will hammer thousands of businesses with costly Brussels red tape even if they don’t trade with the bloc.
The business and environment secretaries hailed a new deal which will shackle Britain to Brussels’ rulebook on food standards as they urged firms to start preparing for it.
But they also admitted that thousands of firms – many of them smaller businesses – will have to prepare for the changes even if they don’t trade with the Continent or have started prioritising commerce with other parts of the world.
Critics branded it a ‘betrayal’ of the historic 2016 Brexit vote and warned it was an act of ‘self-harm’ that could bankrupt businesses after Labour’s national insurance hikes on employers, hikes in the minimum wage and costly new employment laws.
They also warned it would further damage relations with the US, which wants closer trade with the UK on food and agricultural products.
The deal, known as ‘dynamic alignment’ in Brussels, means handing oversight of trade in food and agricultural products back to the European Court of Justice (ECJ) and effectively becoming a rule-taker – even over future new regulations – while having no say over them.
John Longworth, Chairman of the Independent Business Network and former boss of the British Chamber of Commerce, said: ‘This is an absolute disaster.
‘The whole concept that the Government is following at the moment is a betrayal of the democratic decision on Brexit, without a mandate to do it.
‘It’s actually disastrous for businesses as well. It’s appalling because we’re applying EU rules and regulations to 100 per cent of businesses when only 8 per cent of businesses actually export to Europe.
‘It’s just another burden of red tape loaded onto businesses which at the moment are already reducing employment because the cost of running businesses is soaring.
‘Whereas 8% of businesses export to the EU, 14% of businesses export to the rest of the world, and the majority of trade now is with the rest of the world and not the EU and so this just makes us less competitive in world markets.’
Mark Francois, Chairman of the European Research Group of Tory MPs, said: ‘So-called ‘dynamic alignment’ is just code for becoming a rule taker from Brussels again, regardless of the wishes of our own Parliament.
‘What did we have a referendum for, if it was only to be sold down the river by Starmer on this?
‘Regardless of the adverse effects on British small businesses, Starmer is still a passionate Europhile – and always will be.’
While larger corporations, such as supermarkets, have welcomed the deal as it aims to slash the paperwork required for UK-EU trade, critics say smaller businesses will get caught up by costly new red tape even if they don’t trade with the bloc.
It also means businesses, like farms, will effectively be banned from new innovations that can reduce costs and boost profits, such as growing gene-edited crops.
After Brexit, the Conservative government changed EU laws to allow farmers to grow cheaper and more resilient harvests.
However, under Sir Keir’s deal, Britain’s gene-edited crops revolution would be killed off.
This is because EU red tape on the issue is so burdensome it amounts to a ban in practice.
It is similar for the use of certain chemicals in the growing of crops and other agricultural products.
Emma Reynolds, the Environment Secretary, and Business Secretary Peter Kyle last night confirmed ministers want the new deal, struck by Sir Keir last year, to come into force by mid-2027.
They claimed it could slash the cost of a UK cheese shipment by around £1,200, a salmon load by £1,400, a beef shipment by £1,200 and a cargo of apples by £440.
But their press statement added: ‘The government wants businesses in the agri-food sector to start getting ready now. This includes those that do not currently trade with the EU.’
It added that around 500,000 businesses will be affected, including ‘firms operating entirely within Great Britain who do not currently trade directly with the EU.’
They urged firms to talk to their relevant trade association, supply chain chiefs and respond to a consultation on what support they will need.
But Shanker Singham, a former adviser to ex-International Trade Secretary Liam Fox, has estimated that Labour’s deal could cost the UK economy £15billion when compared with policies under which the UK would diverge from Brussels and do more trade with non-EU nations.
He said: ‘The vast majority of UK businesses sell to the rest of the world or in the UK. And so what the government has done by doing this is prevent any potential reduction of cost and regulatory burden for those businesses.
‘It’s unnecessary. The major beneficiary of this is the EU. It’s an act of self-harm.’
He added that the US would take a ‘dim view’ of the deal because it is one of dozens of countries that think the EU’s regulations are too burdensome.
‘And that’s going to have an effect on the UK’s potential trade deals with countries like the US,’ he said.
