CBI warns Tory candidates of 'severe' damage from no-deal Brexit

Conservative Party leadership candidates should rule out a no-deal Brexit, a major business lobby group said on Friday.

Leaving the European Union without a deal would cause “severe” long term damage to British competitiveness, the Condeferation of British Industry (CBI) said in an open letter to all 12 MPs standing to replace Theresa May as prime minister.

It called for “compromise, consensus and honesty” to resolve the Brexit impasse.

"Firms large and small are clear that leaving the EU with a deal is the best way forward," the group said.

“Prolonged uncertainty is damaging our economy now – driving up costs and reducing sales. Stockpiling of raw materials and goods among SMEs is at a record high."

CBI director general Carolyn Fairbairn told the BBC on Friday a no-deal Brexit should be an option "that is not even considered".

She said businesses were unprepared for a no-deal scenario, adding that "this idea that we are ready is just not true".

"How can you be prepared for £20bn of increased customs costs? How can be you prepared for tariffs rising overnight? 150,000 businesses with no systems in place to do deal with this. This is not a responsible strategy for a government to have."

In its letter, the CBI stressed that small and medium-sized businesses “cannot afford complex and costly contingency plans”.

Tory hard-right candidate Esther McVey earlier in the week said the UK needed to "actively embrace leaving the EU without a deal".

Former Foreign Secretary Boris Johnson and ex-Brexit Secretary Dominic Raab have said they would like to renegotiate the terms of Prime Minister Theresa May's withdrawal agreement with the EU, but whatever would take the UK out of the bloc on October 31, whatever the outcome of negotiations.

Other leadership contenders have said reaching a deal should be the main priority.

International Development Secretary Rory Stewart said he would not serve in a government that pursued a no-deal Brexit or was led by Johnson – the popular favourite for the contest.

Health Secretary Matt Hancock and Foreign Secretary Jeremy Hunt both said warned that forcing a no-deal scenario could lead to a general election if parliament stopped the new prime minister from ratifying it.