Business leaders are suggesting a “partial customs union” as a compromise plan for future trade with the European Union after Brexit.
The Institute of Directors (IoD) said its proposals would cover industrial goods and processed agricultural products and would help maintain the competitiveness of key industries.
With business groups pressing the Government for more information on trading arrangements post-Brexit, the IoD said it would support a “bespoke” deal with European counterparts.
Turkey and the EU are seeking to improve their agreement, and the IoD argued the UK should take some of the proposed changes on board when negotiating its own customs arrangements with the bloc.
In its report, the IoD said its suggestion would allow the UK to forge its own trade agreements alongside EU negotiations.
It would also allow the UK to maintain full control over agricultural tariffs, said the business group.
Stephen Martin, director general of the IoD, said: “As a fundamental principle of European Union membership, the UK’s decision to leave means that leaving the customs Union is less a matter of choice but rather one of necessity.
“For the welfare of Britain’s businesses, prolonging its operational effects during the transitional period is no doubt crucial.
“In the long term, the UK should consider remaining in a narrowed customs union to mitigate the disruptive effects for business and ensure manufacturing remains competitive and attractive for inward investment.
“In the interest of our members and the wider business community, while respecting the decision taken by the people in June 2016, we feel this is the best way forward.
“We must be ambitious in undertaking the most important negotiations this country has embarked on for decades and push for a bespoke solution.”
Allie Renison, author of the paper and head of Europe and trade policy at the IoD, said: “There are some important choices to be made about our future economic relationship with the EU, but sadly this debate has not fully come to fruition.
“Even now, 20 months on from the referendum, there is still much talk and much less action.”
Barry Gardiner, shadow secretary of state for international trade, said: “This is a welcome contribution to the debate, and reflects the increasing concern among businesses that the Government risks damaging jobs and the economy by arbitrarily ruling out any future customs unions agreement with the EU.”
A Government spokesman said: “We set out our two preferred models in our Customs Future Partnership paper.
“Both of these options set out that we will not be in a customs union, allowing us to make our own trade deals across the world but while still ensuring trade with the EU is as frictionless as possible.
“Of course, the final arrangements will depend on the negotiations with the EU.”