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German industry has warned Britain not to rely on its help in securing a good Brexit deal, in a stark intervention that strikes a blow at the government’s EU departure plans.
Senior ministers have repeatedly claimed since the election that Germany’s powerful exporters will exert pressure for a deal handing Britain substantial access to the EU’s markets.
However, ministers are told that it is up to the British government to limit the economic fallout from its decision to leave the single market. With the government facing new pressure from business to soften its Brexit plans, German industrialists also warn that Britain will struggle to avoid economic damage as a result of exiting the bloc.
Two of Germany’s biggest industry groups have told the Observer that their main concern during the Brexit process is protecting the single market for the remaining 27 members, even if this harms trade with Britain. [...]
Their comments come just weeks after David Davis, the Brexit secretary, said his claim before the referendum, that German industry would put pressure on Angela Merkel, the chancellor, to hand Britain a good Brexit deal, was “where [the negotiations] will end up”.
A government spokeswoman said: “While we will be leaving the single market and the EU customs union, we want to achieve a comprehensive free trade agreement that allows for the most frictionless possible trade. The government has been clear that we want to ensure a smooth implementation of our new partnership with the European Union that is in the interests of businesses in the UK and across the EU.”
British business has called on the government to consider a transition deal allowing the UK to remain in the single market and customs union for the time being. The call was rejected but several sources have told the Observer that key ministers are warming to the idea of a much more comprehensive transition deal than was previously envisaged.
Under one plan being pushed inside government, Britain would demand a broad agreement for a final Brexit deal and a specific date on which it would kick in. It could then accept a comprehensive transition deal in which the UK stayed in the single market and found a compromise on the customs union, allowing it to negotiate its own trade deals. Several sources said that Davis was taking an increasingly “pragmatic view” on the idea – but that the transition period must last no more than two or three years. However, a source close to Davis said his thinking had not changed significantly.
European businesses are also pushing Britain to stay in the single market and customs union until a final Brexit deal is hammered out. [...]