GROWING cabinet confusion over Brexit has prompted business leaders to demand “urgent” agreement on the UK’s trading relationships after leaving the EU.

In a stinging report out today, the Institute of Directors (IoD) says the government has failed to put “flesh on the bones” of what an initial transitional period would look like.

It criticises cabinet ministers for a “range of speculative arguments over transition” in recent weeks, highlighting a fundamental disagreement between the Chancellor and a colleague over whether the UK should stay in the customs union and single market for several years.

It says: “There is a need for Government to engage with the business community on the practicalities of what transition could mean.

“Instead of dancing around the edges, this issue must become a policy discussion for the Cabinet. This could minimise the growing level of confusion and uncertainty in this area.”

The report lays out a series of options, including extending the Article 50 withdrawal talks by up to a year and Norway-style membership of the European Economic Area.

Chancellor Philip Hammond has suggested the UK may need a three-year transition to avoid the UK lurching into a new trading environment, but International Trade Secretary Liam Fox has said any deal maintaining freedom of movement would “not keep faith” with voters.

Allie Renison, Head of EU and Trade Policy at the IoD, said businesses were pleased the government accepted some form of transition was needed to minimise economic disruption.

She said: “There is now a window of opportunity for the Government to flesh this out as a policy objective to reassure companies that a smooth and orderly Brexit is on the cards.

"Prioritising interim arrangements and thereby mitigating the risks of EU exit means the eventual opportunities aren’t diminished by short-term chaotic cliff edges.”

A UK government spokeswoman said: "We have been clear that we believe an implementation period is in the interests of both the UK and the EU, providing certainty to businesses and citizens, and ensuring we avoid any cliff-edge as we move to our future partnership.

"Since the referendum, the Government has engaged with businesses across the country and we are now intensifying this process to ensure the voice of the British business community is being heard and reflected throughout our negotiations."