All eyes are on Brussels as Brexit negotiations are now underway, with a myriad of possible outcomes to consider from this complex undertaking and an equally broad array of implications for trade.
We have now hosted two events on the changing landscape of UK trade beyond Brexit, and with fringe meetings planned at this year’s party conferences, preparing for a new trading environment, in whatever form that may take remains a key focal point. Whilst some uncertainty remains, it is nonetheless critical we act now to build relationships, dismantle barriers and create an agile, highly skilled workforce that reinforces the UK as a place companies want to invest and do business after March 2019.
Our upcoming UK trade roundtables focus on the future of the UK economy and will explore questions around what can be done to promote productivity and prosperity in the new post-Brexit trading regime, and how the public and private sectors must both contribute.
So what can be done? Unlocking productivity growth is key, given that it’s been sluggish since the financial crisis. With 60 per cent of the UK’s productivity growth coming from exporting companies, the importance of trade policy and export promotion is clear. Internationally competitive, mobile and high productivity businesses are attracted to countries that have good access to other international markets. This makes it all the more important to ensure that the broader business climate here in the UK remains highly competitive and that tax and regulatory barriers to business expansion, trade and investment are kept to a minimum.
Avoiding unnecessary or punitive two way tariffs on goods or excessive administrative burdens to business trading in Europe as well as reducing barriers to trade with other major economies around the world, will provide a vital underpinning to UK productivity growth in the decades ahead. This is especially important for trade in services (around 80 per cent of the UK economy), with services exports comprising 12 per cent of GDP—the highest in the G7, which should form a priority for future free trade agreements.
It is widely recognised, however, that negotiating comprehensive Free Trade Agreements can take many years, with trade in services being a particular challenge. But there are other ways of encouraging stronger trade links in the short-term. For instance, government can help by focusing on practical administrative and regulatory changes, like those set out in their recent Future Customs Arrangements paper, which could reduce the barriers and costs associated with "doing business" in other countries, and by providing a strong focus on export promotion in key sectors and ongoing access to competitive sources of export finance.
Businesses can also do more to prepare now for the opportunities of a new trading regime. It is critically important to ensure UK businesses are as strong as possible at home so that they can successfully trade post-Brexit in overseas markets. This in turn will help identify where we have a competitive edge as a nation, encouraging investment in sectors with high potential to open up new markets while also capitalising on our strong position in key tradable services sectors, as well as our traditional strength in manufacturing, as part of a future export strategy.
The government’s Industrial Strategy will need to provide further support, both nationally and locally, and foster greater collaboration between the private and public sector. In this light, the recent creation of the Brexit business council provides a welcome channel for business to share their ideas with decision makers on emerging policy. We are doing likewise with our clients through our Trade and Investment Hive.
Our response to the government’s Industrial Strategy consultation highlighted four themes needed to underpin success: developing skills and education; upgrading national infrastructure (including transport, housing, energy and digital); supporting investment, innovation and business growth; and ensuring a balanced economy, in terms of sectors and regions.
In this context, central and local government need to create conditions in which all types of business across a wide range of sectors can contribute to economic growth. Councils and Local Enterprise Partnerships have a key role in developing successful local industrial strategies and supporting businesses to export. Indeed, prioritising export promotion within the regions could empower cities to compete globally while helping to rebalance the UK economy.
Cities and regions therefore need to grasp the potential impacts of the new trading environment on local businesses, understand their strengths and weaknesses and help resolve local impediments to trade. Our Good Growth for Cities research demonstrates that places with clarity on their investment priorities are better placed to reshape regional investment to deliver inclusive, place-based growth.
So while the details of the post-Brexit trading landscape remain unclear, there is much that can be done now to prepare for the future. It is vital for government, businesses and local communities to work together and lay the foundations for future success in the post-Brexit trading environment.
Starting at the Labour and Conservative Party conferences this Autumn, we are inviting government and the business community to engage in dialogue to start to explore some of the big questions that will require resolution if we are to succeed:
- What are the current barriers to innovation, growth and exporting? How do these differ in different regions of the UK?
- How can we get UK businesses ready for the opportunities that a new trading regime will present?
- What should be the key drivers of the industrial strategy? How can policy-makers foster collaboration between the private and public sector?
- What role do city-regions have in developing a successful local industrial strategy and
- supporting local businesses? How can the needs of local communities be factored in?
We believe with a high level of engagement from the private sector and communities, important ideas are likely to emerge. If government and business continue to work together we will be well-placed to thrive in the post-Brexit trading environment. I encourage you to join the discussion.
For more on PwC’s Trade and Investment Hive please visit Trade Matters, our expert Trade Hub.
If you would like to register your interest to attend our events or to find out more about our thought leadership programmes, please email Saskia Abdoh.
