Read a companion piece on 'preparing for a new trading regime beyond Brexit'
Prospect and PwC held two roundtable meetings at Labour and Conservative conferences this year entitled, how can trade policy and export promotion support the successful delivery of Brexit and a local industrial strategy? The two events brought together politicians, business representatives, policy experts, academics and diplomats to discuss the UK’s emerging new trade policy and how it interlinked to a wider industrial policy aimed at rebalancing the UK economy.The debates ranged from the new challenge of Brexit and the potential opportunities coming from a new UK trade policy back to longer running issues in the UK’s economic performance: the concentration of growth in London and the South East, the seemingly perennial productivity problem and the need for more investment and higher exports.
Tina Hallett, the Government and Public Services lead for PwC, introduced both discussions by noting PwC’s work in response to Brexit – notably the setting up of its new expert Trade and Investment Hive. Both discussions aimed to move beyond debating the possible outcomes of the Brexit negotiations and onto the practical steps that business and policymakers needed to be taking to ensure the UK’s prosperity in a post-Brexit world.
Across both roundtables there was a widespread consensus that trade policy should not been seen as an end in and of itself but as part of a wider industrial and economic strategy policy aimed at a broader rebalancing of the UK to be more sectorally and geographically diverse. Governments and representatives across the political spectrum have been talking about rebalancing the UK economy for at least a decade. Progress has been, at best, mixed. As one of the participants argued: “How do you get the economy rebalanced unless you get industry and manufacturing back?”
Adam Marshall, the Director of the British Chambers of Commerce, noted that the plethora of government initiatives and schemes that range from trade promotion, to skills policy to access to finance had the potential to confuse business. Policies were often not given adequate time to bed down in order to allow firms to take full advantage and thus deliver results. Rushanara Ali MP, member of the Treasury Committee and Trade Envoy to Bangladesh, also cited the importance of establishing continuity and consistency in order to allow business to function. Chi Onwurah MP, a Shadow Business Minister, broadly agreed and went on to argue that Labour’s “mission focused approach” to issues such as research and development policy or science funding would provide more continuity.
Complicating any attempt at an industrial policy, is determining at which level it should be delivered. Tony Travers of the London School of Economics, noted the patchwork makeup of governance in the UK with its devolved governments in Wales and Scotland and the continuing developments of City Deals. The recent election of several city mayors was also cited. However, Walker argued, while many of these mayors were cognisant of what they want to achieve for their local economies, they often lacked direct policy levers to pull.
Much of the debate during both events returned to Britain’s poor productivity performance over the last decade. While, the importance of productivity was recognised by many participants, Tina Hallett noted that it was important to frame the discussion clearly in order to shape the Industrial Strategy in the right way to deliver the outcomes we are seeking. Vicky Pryce argued that productivity in its purest sense of economic output per capita was a long running problem and one which – most economists agreed – would only be amplified by Brexit which has the potential to reduce access to the UK’s largest trading partner. However, for James Cooper, the CEO of Associated British Ports, the challenge was not so much “productivity” as “products”. He argued that that the UK simply did not produce enough goods or services that the rest of the world wanted to buy.
At both roundtables there was in depth discussion of training and skills policy – something long noted by policymakers as a priority and seen as crucial to making an industrial strategy work. The old question of the UK’s apparent undervaluing of STEM (science, technology, engineering and mathematics) education and the lack of parity of esteem between academic and vocational skills were both raised.
Views varied on the extent to which progress had been made. Tony Walker, the Deputy Managing Director of Toyota Manufacturing in the UK, noted how popular his firm’s apprenticeship scheme was with school leavers and how bright the prospects were of those accepted on to it. However, many school leavers still seemed to think of a university degree as their natural next step. He argued that apprenticeship policy would not be a final success until people proudly declared “I am the first apprentice in my family.” Antoinette Sandbach MP also made a convincing argument for encouraging people to pursue apprenticeships and noted how higher student tuition fees may be raising the appeal of apprenticeships to young people.
Turning to the shape of future UK trade policy, many were keen to talk up the opportunities that would come for business from striking new UK free trade deals. Whilst business representatives were open to these opportunities, they were generally also keen to not lose sight of the need for a deal with Europe which would secure access for UK goods and services to EU markets. Charles Grant, the head of the Centre for European Reform, sounded a note of caution on the presumption that by leaving the EU Customs Union and regaining control of its trade policy, the UK would derive major economic benefits. Grant went on to note that, whilst this was a likely scenario, it was not inevitable and the Treasury had serious concerns that any new trade deals would not be able to outweigh the effect of a less close economic relationship with the EU.
In contrast, Richard Graham MP drew on his experience as a UK trade envoy and was keen to outline the potential of more trade with faster growing economic regions of the world such as South East and East Asia. Furthermore, when speaking of the upcoming negotiations, Graham argued that “this is not a zero sum game. There is no great benefit to the continent’s financial centre being destroyed or UK exports being damaged.”
Lockwood Smith, the former New Zealand High Commissioner to the UK and once New Zealand’s trade minister, argued that the UK had chance to lead the world by developing a model of free trade deals that included strong provisions on financial services – an area lacking from most existing deals and an obvious area of priority for the UK. The consensus amongst most diplomatic participants was that the UK and EU talks could avoid the so-called “cliff edge risk” of Brexit without a deal and reversion to WTO rules, as long as a long enough transitional period was agreed. Views on the final deal ranged from “Canada” (a comprehensive deal on goods with little on services) to “Canada Plus” (i.e. a deal on goods trade coupled with provisions for services).
As Duncan Weldon noted during the conclusion of the Conservative event, “we can all broadly agree that the EU is our single largest market and will continue to be, for some time, our single largest market.” While this sentiment was shared by several, participants at both roundtables were divided on the extent that Brexit was either a challenge or an opportunity for the UK. However, there was widespread consensus that it was a strong catalyst to address existing longer running UK economy issues and that an industrial strategy had a large role to play in building a new “prosperous economy.” In other words, an economy which promoted inclusive growth as well as economic growth.
You can also read about Tina Hallett's thoughts on 'Seven things on the Brexit ‘to-do’ list after Party Conferences'
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