Britain's business leaders are getting increasingly nervous about the outcome of Brexit talks with warnings of industrial and economic stagnation.

The Society of Motor Manufacturers and Traders (SMMT) warned the government of the dangers a poor deal, or no deal, would pose the automotive industry.

Transitional deal

Mike Hawes, chief executive of the SMMT suggested the Brexit talks should begin with setting up a transitional deal to ensure that the risk associated with market uncertainty is kept to a minimum.

He said in a speech on Monday night to the trade body's annual conference: This uncertainty cannot be allowed to drag on – and drag British industry down with it."

He added: "We need a clear interim arrangement – an arrangement enabling ‘business as usual’ from day one.”

Nissan's Sunderland plant celebrates the production of its millionth Qashquai - Source: Carscoops

Tariffs will be costly

Britain's automotive industry is one of the country's largest manufacturing sectors, responsible for about £60bn in annual exports.

The SMMT estimates that without a trade deal, export tariffs and other foreign trade charges could cost the industry up to £2.7bn a year.

Hawes recommended that the government seek an interim deal that keeps the UK in the single market and customs union until the negotiations are complete.

Among the foreign motor manufacturers in Britain, several, including Nissan and Toyota, have said they will commit to a future in the UK.

CBI sees investment on hold

Meanwhile, the Confederation of British Industry (CBI) warned the whole UK economy will suffer from the protracted divorce talks between Britain and the European Union.

CBI director general Carolyn Fairbairn warned that ongoing uncertainty surrounding Brexit talks will damp the appetite of business leaders for making major investment decisions.

While inflation is expected to peak somewhere near 3% in the coming months, wage growth has already stalled at 1.9% as industry tightens its purse strings in expectation of tougher times to come.

Fairbairn said: "Growth will be slower in the years ahead as living standards are hit by rising inflation and, after some initial strength, uncertainty will weigh on business investment."

Losing faith in PM

A survey by The Share Centre this week showed just a fifth of private investors believed Theresa May can secure a positive Brexit deal for the UK, down from more than half when the same number was polled before the election was called.

"We're in a regrettable situation at the moment – we have almost no idea what our position is in those talks – are we going to leave the single market and the customs union?" said Tom Stevenson investment director at Fidelity.

He concluded: "It's not a good situation and many people are nervous about it."

Chancellor Philip Hammond: At his inaugural Mansion House speech, Hammond calls for 'ambitious' agreement - Source: Shutterstock

Chancellor’s Mansion House Speech

Perhaps the best news for British industry on Tuesday, however, was backing from Philip Hammond, the Chancellor of the Exchequer, whose inaugural Mansion House speech stressed the need to put the economy first in Brexit talks.

Hammond, a soft Brexit advocate, said Britain must pursue a liberal immigration regime and an “ambitious” free-trade agreement.

He added: “We will leave the EU, but it must prioritise British jobs, and underpin Britain’s prosperity. Anything less will be a failure to deliver on the instructions of the British people.