Brexit is such a big a problem it's easy to overlook those other gritty policy problems. Here, two MPs talk business and exports—what are their priorities?by Antoinette Sandbach , Bill Esterson / September 13, 2018 / Leave a comment
The Brexiters’ mantra “F*ck business” isn’t good enough
Antoinette Sandbach Conservative MP for Eddisbury, member of the Business select committee
As our departure from the EU approaches, it is important to have clear priorities, particularly when it comes to the future of trade. For 500 years we have been a trading nation. It is essential that this continues.
While some Brexiteers fantasise about a UK freed from the EU’s shackles, business people I meet are deeply concerned about a drop in trade after Brexit. We have 40 free trade agreements through the EU and hundreds of additional treaties with 168 different countries that must be renegotiated.
These concerns are often met with an unequivocal and blunt reaction: “f*ck business”. It is entirely understandable that deal preservation is not nearly as sexy as deal making but striking new trade deals should not be at the expense of the benefits which we currently enjoy—as they will not make up for the loss.
Our present arrangements are incredibly complex. The EU’s common market allows a free movement of capital and services that no free trade deal could ever achieve.
We also have a unique customs arrangement: our manufacturers benefit from one of the most complex and efficient international supply chains in the world. When we talk about trade preservation, we must factor in the benefits of these arrangements.
A Government paper, which was forced into publication in January 2018, analysed the impact of different EU-UK deals. It found that that the impact of moving from the EEA-type scenario to a FTA-type scenario is a 3.2 per cent hit to GDP.
We frequently hear that the US will make up for lost ground. Setting aside whether the Trump administration would sign such a deal, the analysis suggests a US-UK deal would increase UK GDP by 0.2 per cent in the long-term, not enough to make up for the drop in EU trade.
The response is that we must look to new and developing markets. However, the estimates again suggest that an ambitious FTA agenda, including with TPP countries, ASEAN, China, India, Australia and New Zealand would not be enough, adding a mere 0.1-0.4 per cent of GDP. All these new trade deals could therefore provide a total long-term increase of 0.2-0.7 per cent of GDP. This doesn’t go anywhere near offsetting the potential 3.2 per cent GDP loss, let alone bring the huge benefits we were promised during the referendum.
It is also worth noting that free trade agreements take years to negotiate and involve compromises, many of which the British public are unlikely to support. Australia has already stated that it would impose tough terms for a new deal, requiring us to import hormone-treated beef and allow more Australian immigration to the UK. India has said that any new trade deal would require the UK to agree much higher immigration for Indian citizens.
If we are to have a workable trade policy for the future, it must be to stick close to the EEA, and concentrate on trade preservation. This is not glamourous, but it is prudent. The consequences of failing to do this would risk both our economic livelihood and international reputation.
Labour—the party of business
Bill Esterson Labour MP for Sefton Central and Shadow Minister for Trade
Labour understands that supporting SMEs is a key policy objective. In government, we will support business start-ups and scale ups while promoting good practice.
The Federation of Small Business has found that four in ten small firms found credit unaffordable—less than a quarter said the opposite. One in three small businesses are being offered interest rates of 7 per cent or more, up by a quarter from the same time last year. Labour will set up a national investment bank and network of regional development banks to finance small businesses.
We are committed to prosperity in every corner of Britain. It’s why we have pledged to bring forward rural 4G programmes to support small businesses and committed to ensuring that the new export incentive scheme for SMEs takes regional needs into account.
To support SMEs we will ensure that any trade deal benefits the whole nation’s exporters. We will ring-fence Tradeshow Access Grants, so that SMEs are able to get worldwide opportunities with support from government.
The shameful Carillion fiasco shone a spotlight on another issue that plagues SMEs: late payments. The amount of businesses forced to close by chronic late payments is estimated at 50,000. If every payment were made on time, our economy would be £2.5bn richer.
The effect of late payments on businesses are clear and worrying: 37 per cent have run into cash flow difficulties, 30 per cent have been forced to use an overdraft and 20 per cent cite a slowdown in profit growth. Labour will tackle late payments by having a 30-day payment rule. We’ll develop a process based on the Australian binding arbitration system for late payers, which involves fines for chronic offenders in both the public and private sector.
It’s become apparent that the Tories are not on the side of smaller businesses. They aren’t on the side of those struggling with late payments or unable to access the finance they need to expand their business. We recognise that new employers mean new opportunities and that a business able to expand is a business that is able to supply jobs. We will create a fair market of genuine opportunity to create the well paid jobs and deliver the prosperity the people of this country need.