CBI warns Tory leadership hopefuls the UK must avoid a no-deal Brexit

Tory leadership hopefuls have been warned of the "severe" consequences for UK businesses if they pursue a no-deal Brexit.

In an open letter to the candidates vying to replace Theresa May as Prime Minister, CBI boss Carolyn Fairbairn said "compromise, consensus and honesty" was needed to end the Brexit impasse.

Bookmakers' favourite Boris Johnson, as well as fellow Brexiteer Dominic Raab, have both insisted that they would take the UK out of the EU on 31 October, with or without a deal.

However, their rival Jeremy Hunt has warned that doing so would be "political suicide" for the Tories.

In her letter, Fairbairn said her members' "frustration" with Westminster had grown in recent years due to the failure to deliver on the result of the 2016 referendum.

She called on whoever becomes Prime Minister to work in partnership with business to ensure a prosperous future for the UK.

But she added: "The next Prime Minister can only claim the Conservatives are the party of business if they secure a Brexit deal that protects the economy, jobs and living standards.

"Firms large and small are clear that leaving the EU with a deal is the best way forward. Short-term disruption and long-term damage to British competitiveness will be severe if we leave without one. The vast majority of firms can never be prepared for no-deal, particularly our SME members who cannot afford complex and costly contingency plans.

"We need compromise, consensus and honesty to resolve the Brexit impasse, quickly. Prolonged uncertainty is damaging our economy now - driving up costs and reducing sales.

"Stockpiling of raw materials and goods among SMEs (small and medium-sized enterprises) is at a record high. Billions of pounds in investment are being diverted from the economy, harming future jobs and prosperity. 

"The CBI urges the next Prime Minister to build their approach to Brexit from the bottom up – from the clear, detailed evidence of firms, on the ground, managing the day-to-day implications for jobs. Only then will the UK have the foundations for a world beating economy."

A dozen Tory MPs have so far announced their intention to take part in the leadership race, with more expected to follow.

Nominations close on 10 June and the new Prime Minister is expected to be in place by late July.