The UK Government will be adding to the burden on businesses struggling to cope with the Covid-19 crisis if it does not seek an extension to its Brexit transition period, a former senior civil servant has said.

Philip Rycroft, who was the permanent secretary in the Department for Exiting the EU, told a Holyrood committee that not seeking an extension is a “political decision”.

The former Whitehall mandarin said he believes it is still possible for the UK and EU to agree a new trade deal before the transition period expires at the end of this year – but added there is a “huge amount of work still to do”.

Giving evidence to MSPs on the Europe Committee, Mr Rycroft said even if a trade agreement is reached “the terms of trade will change very substantially” between the UK and EU.

He described this as a “huge challenge” for firms on both sides, adding: “Where we are at the moment, pretty much every business in the UK is dealing with the biggest peacetime economic shock we have felt since 1929, at a minimum.

“And the afterburn of that shock is still going to be with us this year and probably well beyond.

“It would appear to be an odd time, when you have got a choice, to be adding to the burden on businesses.”

The new trade border with Europe will come into place “just at a time when businesses are trying to find their feet again after the coronavirus crisis,” he said.

Assuming no extension to transition, we know we are going to have a trade border

Mr Rycroft, who also worked for the Scottish Government during his civil service career, said: “It is a perfectly legitimate political decision to take but of course that political outlook does not necessarily coincide with the interests of a lot of UK businesses.

“Assuming no extension to transition, we know we are going to have a trade border.

“For goods that will mean, in either deal or no-deal, that goods transiting that border by freight will have to have customs declarations, security declarations, they will have to go through the rules of origin process to prove where the goods have come from, they will have to go through the regulatory procedures to ensure that those goods are capable of being marketed either in the UK or in the EU.”

He added: “These are the so-called non-tariff barriers which will apply at the end of this year, come what may, if we don’t get an extension.

“If we are in a no trade deal context, add to that the potential for tariff barriers as well, which would be an additional burden for business.”

Failing to reach a trade deal will have a “very big impact”, he said, adding that “pretty much overnight” the UK would move on World Trade Organisation terms and conditions.

He said: “There is clearly a risk in that because businesses have not had the time, partly because of coronavirus, to prepare for that.

“There would be hold-ups at the border, because businesses would not have the right paperwork in place.”

He added: “I have no doubt that if coronavirus hadn’t happened the UK Government right now, for example, would be running a very big campaign as it did last year, to engage businesses to encourage them to take forward their own planning for what is going to pertain at the end of this year.”