British business leaders are calling on the government to put a transitional agreement in place that would allow the UK to remain in the European single market and customs union until a new trade deal can be brought into force.

During a lecture at the London School of Economics, leading figures from the CBI - a lobbying group that represents around 190,000 businesses of all sizes across the UK - have outlined the benefits this limited period of transition would have in delivering continuity and certainty for companies as Brexit looms.

The recommendation has been issued in response to concerns that it will not be possible to have a new free trade agreement between the UK and EU in place by the end of the Article 50 process that will take Britain out of the union in March 29th 2019. This creates the prospect of a cliff-edge effect, which would see British businesses suddenly hit with an influx of trade tariffs, red tape and regulation when trying to trade internationally.

The CBI estimates that without a deal in place, the UK would face tariffs on 90 per cent of its EU goods exports by value, resulting in costs of £4.5 billion to £6 billion (€5.08 billion to €6.78 billion) per year. It argued that a transitional deal would eliminate the risk of these costs having to be paid, which would encourage companies to carry on investing in the UK.

Carolyn Fairbairn, CBI director-general, said: "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."