The UK should stay in the single market and customs union until a final Brexit deal is in force, according to the CBI.
Carolyn Fairbairn, head of the business lobby group, said it was “impossible” that all the details of a new trade deal with the European Union would be in place by March 2019.
That is when talks about the UK’s withdrawal are due to formally finish.
To minimise disruption, UK businesses need a “bridge” instead of a “cliff edge” for the new deal, she said.
The CBI’s proposal was backed by the manufacturers’ organisation EEF and the TUC trade union.
However, the chairman of the pro-Brexit group, the Economists for Free Trade, said it appeared to be an attempt to remain in the EU “through the back door”.
“This is not about whether we are leaving the EU, it is about how,” Ms Fairbairn said in a speech at the London School of Economics.
“Once the Article 50 clock strikes midnight on 29 March 2019 the UK will leave the EU.”
The CBI is proposing the UK stays in the single market and customs union “for a limited transition period paving our way to a new future”, she said.
“This common-sense approach would bring continuity to firms in the UK and the EU and protect investment today,” she added.
‘Wasteful, difficult and uncertain’
Otherwise businesses might be forced to adapt twice – first to a transitional arrangement, and then to the final trade deal, Ms Fairbairn said.
“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,” she said.
“One transition is better than two and certainty is better than uncertainty.”
Terry Scuoler, chief executive of the manufacturers’ body EEF, said: “The absence of any clarity for businesses makes this a sensible approach to transition.”
The TUC also backed the move, saying “it’s crucial that we get the transition right as we leave the EU”.
However, Patrick Minford, chairman of the Economists for Free Trade and an economics professor at Cardiff University, said it was not clear what the CBI wanted.
“They are constantly arguing for remain through the back door and this sounds like the same thing,” he told the BBC.
He said the UK and EU would have to reach some kind of deal by the end of March 2019 and that would involve transitional arrangements.
The CBI’s comments come ahead of a government conference on Friday with business figures from sectors across the UK.
The event, to be hosted at Chevening House in Kent, is part of government plans to work more closely with industries over Brexit.
Business groups have increased their calls in recent weeks for the UK to maintain existing trading relations with the EU.
After last month’s election, five business bodies – including the CBI and EEF – called for the government to maintain the economic benefits of the single market and the customs union.
The CBI has now gone further by urging that the UK stay in those trading arrangements until a final deal is in place.