Committee
Constitution, Europe, External Affairs and Culture Committee 21 November 2024
21 Nov 2024 · S6 · Constitution, Europe, External Affairs and Culture Committee
Item of business
Review of the UK-EU Trade and Co-operation Agreement
Mike Buckley
Watch on SPTV
On the difference between the OBR saying that there is a 15 per cent drop in trade intensity and other people saying that things are not so bad and are much better than they would have been, that is partly a result of looking at different data sources and it is partly about people’s different perspectives. You will remember that, pre our leaving the single market, the customs union and the EU, there were lots of projections as to how bad the economic impact was going to be but, in the event, it often has not been as bad as people expected it to be. As a result, a cohort of people are saying that things are not quite so bad as we thought they were going to be. However, other people compare with things as they could have been and look at a counterfactual. That is about asking, “Had we stayed in the EU, the single market and the customs union, where would the UK economy now be and where would trade in goods and services now be?” If you look from that latter perspective, you have a much more pessimistic view on where we are on trade in goods and services or indeed just on sectors thriving. Another problem is that there is lots of data that we do not have, as others have referred to. With industries such as the automobile industry—those that make big physical things that are constructed, sold and traded by big companies that gather data and can communicate it—there is a lot of readily available data, but with some of the newer industries such as fintech, which was referred to earlier, there is much less data gathering. That is also the case with small and medium-sized enterprises. I have spoken to a lot of people working in SMEs across a range of sectors who have stopped trading with the EU entirely. Others have just stopped trading at all, because that was what they used to do, or they have shifted to doing other things. Nobody is systematically gathering that data, so nobody really knows, other than from anecdotal evidence, what the impact has been. Because those smaller organisations do not have the capacity to employ lots of people to fill in forms if they are trading in goods or to adjust to the fact that their mobility is reduced if they are trading in services, many SMEs have shifted to doing different things, but they have had nobody to tell that to. The Government has not been interested in that information. The previous Government was not interested in it, and I am not sure how interested the current Government is. 09:30 We are missing data on the regional impacts. Before Brexit happened, research was done into what the regional impacts would be. Essentially, the determination was that areas such as London and other high-performing areas of the UK would not be particularly badly affected, but that the regions of the UK that were already poorer, such as Northern Ireland, the north-east, the poorer parts of Wales and south Yorkshire, would be much more badly impacted. It was expected that the impact in London would be a loss of, say, 1 per cent of GDP and that the loss in the north-east would be something like 12 per cent of GDP. We simply do not know whether that has been borne out. I suspect that it probably has been, but I am not aware of anybody who has the capacity or the choice to do that research, and certainly the previous Government was not interested in doing it. As yet, we do not know whether the current Government will be. However, there is some evidence from the regional GDP figures, which show that Northern Ireland has jumped from being bottom of the pile in every survey pre-Brexit to being consistently number 2 after London. London is not doing too badly, as far as we know. Northern Ireland is in both markets for goods and is doing better as a result. We can all celebrate that but, from the data that we have, it sounds as if the rest of the UK, including Scotland, is doing worse. I would love to do that research but, as an organisation, we simply do not have the capacity. However, I am continually aware that it is a job that needs to be done. If it was borne out that already poorer regions of the UK are losing out, partly as a loss of structural adjustment funding but also just because of a loss of economic activity, that would be really important. Another piece of work that needs to be done is consistent, or much more in-depth, research with SMEs.
In the same item of business
The Convener
SNP
Under our second agenda item, we will continue to take evidence on the second phase of our review of the trade and co-operation agreement between the United ...
Professor Catherine Barnard (University of Cambridge)
Thank you very much for the kind invitation to be here. I am a lawyer, so I will leave it to Jonathan Portes to talk about the economics. The TCA provisions...
Professor Sarah Hall (UK in a Changing Europe)
Thank you very much for the invitation to be here. The Office for Budget Responsibility recently concluded that the data that it has seen on Brexit is broad...
Mike Buckley (Independent Commission on UK EU Relations)
I do not want to repeat things that have already been said. I am sure that you are aware that services make up the bulk of our economy—72.8 per cent of our g...
Professor Jonathan Portes (King’s College London)
I echo what Catherine Barnard and Sarah Hall have said. Clearly, there are some additional barriers to the services trade as a consequence of Brexit and the ...
The Convener
SNP
It will be a bit tricky to manage the meeting, given that all the witnesses are online, so I ask members to direct their questions to certain witnesses. If a...
Alexander Stewart (Mid Scotland and Fife) (Con)
Con
Good morning. You have all touched on the challenges that we have faced and that we continue to face in managing the processes for our sectors. Professor Por...
Professor Portes
It is very unfortunate that—as, I suspect, you know—the data on the UK services trade is considerably less timely than the data on its goods trade. We do not...
The Convener
SNP
Mr Bibby has a quick supplementary, and then I will bring in Professor Barnard.
Neil Bibby (West Scotland) (Lab)
Lab
I want to follow up on the points that were just raised about trade in services, although it is largely excluded from the TCA, holding up better than trade i...
Professor Portes
There is quite a lot of analysis but, as I said, it is slightly hampered by the fact that the data is far from ideal even at a UK level, let alone at a count...
Professor Hall
I totally agree with what has been said on other business services. It is important to set out that that is an area where future research is needed. It is an...
The Convener
SNP
I will bring in Professor Barnard on Alexander Stewart’s original question.
Professor Barnard
I will answer the first part of that question, which was about which sectors have been badly affected, so I am looking at the negative rather than the positi...
Keith Brown (Clackmannanshire and Dunblane) (SNP)
SNP
Good morning. I am a wee bit stunned by the diversity in the responses, which go from quoting the OBR talking about a 15 per cent drop in trade intensity ove...
Professor Hall
I do not have balance of payments figures readily available, but there are indications that the impacts have been different across the UK. I refer you to Pro...
Mike Buckley
On the difference between the OBR saying that there is a 15 per cent drop in trade intensity and other people saying that things are not so bad and are much ...
Keith Brown
SNP
Before I bring Professor Portes in, I note in response to what Mr Buckley has just said that the vast majority of the evidence that the committee has heard h...
Professor Portes
Picking up the original question about the difference between the OBR assessment and mine, I note that the answer is easy—there is no difference. The OBR sai...
Keith Brown
SNP
I will bring in our last witness. Professor, on that point, you said that, even with the best will in the world, the information is not available. There is n...
Professor Hall
I think that that was Professor Barnard. I do not have anything to add on your question.
Professor Barnard
On your point about goods versus services—you specifically mentioned seafood producers—you are absolutely right. We are mainly talking about services, but wh...
Stephen Kerr (Central Scotland) (Con)
Con
I would like us to try to get our arms around what we are talking about. We are exclusively talking about services here. The UK is currently the third bigges...
Professor Barnard
I am a lawyer, but it is clearly dominated by services.
Stephen Kerr
Con
Does anyone have a more definitive split?
Mike Buckley
They are not necessarily what you want, but I can give you some statistics that I have in front of me. They are on our services exports, but not necessarily ...
Stephen Kerr
Con
Those are global figures rather than being specifically on exports to the EU.
Mike Buckley
Yes.
Stephen Kerr
Con
Professor Portes, do you want to comment? You are speaking, but we cannot hear anything.
Professor Portes
The muting is happening centrally; it is being controlled from Edinburgh and not from London. The picture may be slightly misleading. Our exports to the EU ...