Understanding Brexit opportunities
Jacob Rees-Mogg has just been appointed “Brexit opportunities Minister”. To understand what the benefits and opportunities of Brexit, we need to understand where we are now.
The famous blue passports (produced in France) are now with us, and the crown on pints might be on the way (although we could have had them before).
We were always free to make almost all of our own laws. “Domestic” laws had to be in line with agreements reached in Europe, and the UK elected MEPs to the European Parliament to review proposed Directives and Regulation. Taking back control was the cry but if anything we have now concentrated power even more at No 10 at the expense of Parliament and the devolved administrations . The Government is using Statutory Instruments much more than usual with laws being passed with little or no scrutiny. This has been exacerbated by the restructuring of No 10 forced on the PM after ‘Partygate’ resulting in a presidential style of government. Northern Ireland has been destabilised and the relationship with the EU is fraught. The Conservative government had full control when it signed the TCA with all the terms and conditions that it requested. Now it has lost control.
Government seems to have abandoned the idea of bonfire of regulations apparently because it is difficult to do so when we have net zero to deal with. Anyway, the penny seems to have dropped that if any regulations are eased they are likely to be in the financial sector which has had to cope with not having mutual recognition of regulation as UK now a third country as far as the EU is concerned. And if regulations are changed they need to be in line with the TCA, and not add to red tape. In fact, the Finance Bill (which has just gone through approval) includes a reduction in the tax surcharge that banks pay on profits from 8% to 3% from 2023 to coincide with the raising of corporation tax to 25% to avoid disproportionately disadvantaging a UK financial sector already under increasing pressure from Brexit. The result: a loss of revenue to the Exchequer.
In terms of taking back control of borders the Government has just stopped reporting on daily migrant arrivals by boat from Calais which is a clear sign that they have lost the battle. They have also had to recognise a shortage of key workers and issued several additional visas- for HGV drivers, doctors, nurses, butchers. As catalogued by Byline TV, farmers have been struggling with labour shortages, amid a lack of seasonal staff from Europe who normally account for some 90% plus of seasonal labour in the UK[i]. This has led to one of the tightest labour markets on record, way above most WEU countries. This means higher wages and prices in key sectors contributing to higher inflation and a quicker raising of interest rates here compared to elsewhere.
The government offered 30,000 visas to horticultural workers and 5,500 to poultry workers, and 5,000 to HGV drivers, but we have no idea of actual numbers. The reason for FOI requests being refused is "it was not in the public interest".
We now have the most expensive skilled visa scheme in the world. For all the talk of being "Global Britain" the cost makes it more difficult for small businesses and universities to pay for anyone to come, disadvantaging small businesses and academic institutions in the UK.
Trade is now some 15% lower as a result of leaving the EU. The ONS [ii] also reports that 65% of exporters and 75% of importers faced challenges in late November to early December 2021 with additional paperwork, change in transportation costs and customs duties or levies being the top challenges for traders.
Things will get worse. The UK decided not to check goods into the UK because they were worried about empty shelves, but the EU did apply its full checks. The Dover stacking system operation - Operation Travel Access Protocol (TAP) has been activated 20 times this year, and 69 times throughout the whole of last year. With drivers being paid per kilometre there is a reluctance to enter the country if they are not being paid when queuing to get out. OECD forecast that supply chain issues and more acute staff shortages will mean that UK inflation will be higher and stay high for longer than in other European countries- with the inevitable result that we are seeing of higher interest rates and an added hit on businesses and the consumer. Things will get even worse as from July 2022 when SPS (Sanitary and Phyto-sanitary) checks will come into force with physical checks.
Non-tariff barriers are biting. Roaming charges have been reintroduced. EU bank accounts have been closed. We have had to allow old cabotage rules to encourage more inward deliveries to be reinstated in the UK whereas they are not available to us when transporting goods in EU. The decisions by the UK government (not the EU) has given EU firms unfair advantages over UK freight companies. And issues in relation to qualifications remain. It is more difficult to study, travel and work abroad. And UK Universities are ‘reaping a reverse “Brexit dividend” with a sharp drop in the number of applications from E.U. students’ for second year running[iii].
For manufacturing[iv] supply chain issues are worse than elsewhere and input costs going up faster here. Add to this the lack of any support for energy intensive sectors and that is a hammer blow for the economy.
There are some opportunities though. The government has taken control of procurement of PPI contracts, and created exclusive VIP lanes for friends. That they have taken back control of regional grant assistance. Cornwall used to received tens of millions of pounds a year in structural and convergence funds to support local economic growth and communities. It is not clear whether that will be replaced.
So that is where we are now. With the damage that has been done it will be a tough job for the Brexit opportunities Minister. If he keeps in mind some basic core principles such as working to strengthen ties with the EU in the short term, including Customs Union or Single Market membership then that would be a step in the right direction.
[i] Angry Farmers React to Brexit Ruining Their Industry - YouTube
[ii] Business Insights and Conditions Survey (BICS)
[iv]
https://ukandeu.ac.uk/research-papers/manufacturing-after-brexit/