The CBI has urged the UK government to keep the country in the EU single market and customs union until a Brexit deal is struck.

Giving an address at the London School of Economics (LSE) on Thursday, CBI director-general Carolyn Fairbairn and CBI chief economist Rain Newton-Smith made the case for a single transition period to maintain trade between UK and the EU until Brexit negotiations are complete. They said uncertainty about the country’s future is already affecting businesses.

CBI represents thousands of UK business owners (and the NFU makes up the largest part of the confederation).

Theresa May’s government ministers - including Defra Secretary Michael Gove, who was a prominent campaigner for Brexit - have aired the possibility of Britain leaving the EU with no deal in place at the end of the two year negotiation period which began with the triggering of Article 50 in March. The Prime Minister has repeatedly said, “No deal is better than a bad deal” in reference to the ongoing negotiations.

However, the senior CBI figures said that their position is based on economic research looking at the prospect of Britain quitting the EU without a deal in place. The pair said that, even with businesses backing the Brexit talks and goodwill between EU and UK negotiators, it’s hard to see a fully formed Brexit deal taking shape by March 2019.

They expressed concern that either time will run out on negotiations and the UK will be forced to leave without a deal in place, or the framework of a deal will be established at the end of two years, but there will be a further period of uncertainty while both sides work on the exact details of the Brexit agreement. No country has ever left the EU before, and the CBI executives believe that negotiators will need more time than the two years set out in EU regulations to work out an effective deal; they said transitional agreements will be fundamental to keep businesses operating effectively during this period.

However, as working out a special transitional arrangement will take up more time and energy, they believe the simplest way to ensure stability until an agreement is struck and a roadmap to the UK’s withdrawal is established would be for Britain to remain in the single market and customs union.

Speaking at LSE, Carolyn Fairbairn said, “Instead of a cliff edge, the UK needs a bridge to the new EU deal. Even with the greatest possible goodwill on both sides, it’s impossible to imagine the detail will be clear by the end of March 2019. This is a time to be realistic.

“Our proposal is for the UK to seek to stay in the single market and a customs union until a final deal is in force. This would create a bridge to the new trading arrangement that, for businesses, feels like the road they are on. Because making two transitions – from where firms are now to a staging post and then again to a final deal – would be wasteful, difficult and uncertain in itself. One transition is better than two and certainty is better than uncertainty.”

She clarified, “This is not about whether we are leaving the EU, it is about how. Once the Article 50 clock strikes midnight on 29th March 2019 the UK will leave the EU.”

The CBI director said the confederation believes that the single transition that would be achieved by staying in the single market and customs union until an agreement between negotiators is reached represents “common sense” for businesses on both sides of the talks. She said, “If agreed soon, firms here and from elsewhere in the EU will know they face greater stability for a number of years and will carry on investing. They will know they won’t have to adapt twice – first to the transition and then to the final plan. In practice, it would mean the UK would adhere to the EU’s common trade policy, for both internal and external trade, for the duration of the transition period.

“Staying in the single market guarantees continuity for business operations. Staying in a customs union guarantees ease of trade, not just with the EU, but with the rest of the world as well.”

She added, “Agreement is needed fast - waiting until March 2019 is too late. The exact mechanisms to achieve this can be debated and negotiated. But for businesses making daily decisions about where and how much to invest, this is the simplest answer to the uncertainty they face today.”