A new trading settlement: the devil’s in the detail

Earlier this month, I hosted the second in a series of events exploring the changing landscape of UK trade beyond Brexit. Back in November, when we welcomed Gus O’Donnell and a panel of experts, our focus was on how negotiations might work, what roles parliament and Whitehall would play after the general election, and what the outcomes might be.

Six months later, we have more clarity. Article 50 has been triggered and we know we won’t remain in the Single Market or the Customs Union as we know it today. In their places, we will seek to forge our own “frictionless” trade deals not only with the EU but also across the world.

It was in this context that I convened a follow up event with the Australian High Commissioner, the Hon Alexander Downer; Lesley Batchelor, the Director General of the Institute of Export and International Trade; John Grant, Former British Ambassador to the European Union and PwC adviser; and one of our international tax experts Panny Loucas. The discussion was chaired by Michael Moore, Former Secretary of State for Scotland and also a PwC adviser.

What particularly struck me from the discussion was the need to balance a high level approach to trade policy with the granular detail of what changes businesses need to advocate for and be ready for post-Brexit.

Trade policy is undoubtedly important. Tariffs, quotas and non-tariff barriers will be set around the negotiating table and they will dictate how and where we trade. For the Australian High Commissioner, Brexit is an opportunity to create freer trade across the world. He called on the UK to avoid becoming too mercantilist in our approach and gave a useful reminder that it is not only exports that need to be addressed but also imports and investment. He sees Brexit as a way for the UK to open up new markets and create new terms around relationships with existing trading partners, like Australia.

Whilst getting these rules right is of vital importance, it is equally important to understand the detail. What will Brexit will mean in practical terms? How can we get businesses—large and small—ready for the monumental changes that are coming to how they operate? And how can government help them understand and focus on the opportunities that a new trading settlement will present?

As Grant reminded us, we are a world apart from Australia, with its rich natural resources and proximity to Asian markets. But what we can learn from the country is how it plays to its strengths in areas such as agriculture and higher education. We have to understand the detail of trade arrangements in a way that we have not done for many years, so that we too can play to our strengths. And while focusing on trade policy and regulation, we should not lose sight of the importance of trade and investment promotion to help UK companies capture the greatest possible share of the global market.

Batchelor quoted research from the Institute of Exports, showing that as a result of Brexit, 97 per cent of their members have started looking at new export markets. Whilst this illustrates the enormous change that businesses face, I think we can interpret it as a huge opportunity to get businesses exporting. But as Batchelor added, the government campaign is right—“exporting is great”, but it is not easy and it may not be for everyone.

Businesses need to be well prepared to become exporters and there are practical and constructive steps that they can take in the here and now to do this. My colleague Panny Loucas called on businesses to assess where their own value lies and therefore where the risks and opportunities are for them in their businesses and supply chains. Are their workforces at risk? Are there opportunities for lower cost imports or new trading markets? By understanding these key aspects of how they operate they will be in the best possible position to plan for the future.

But this is not just a challenge for the private sector. Government’s focus on industrial strategy is very welcome, as is the prime minister’s vision for government to take a more “active role that backs business.” Government now needs to consider how to move beyond just creating the right conditions for success, to a position where it can actively support our key sectors to succeed in the new trading environment.

Batchelor closed her remarks with a quote from Einstein which struck me as summarising the position very neatly, “First, you have to learn the rules of the game. And then you have to play better than anyone else.” Learning to play the game will be challenging and there will be winners and losers. But the new rules give the UK an opportunity to redefine the kind of growth we want to see: the success of the prime minister’s vision for a “Global Britain” will be decided by how well we can play.

Tina Hallett, Government and Public Services Lead Partner, PwC. She tweets @THallettPwC