Economy

No shortage of trade issues in Rishi’s in tray

There is probably never an easy time to become Prime Minister. But for Rishi Sunak it is fair to say that with soaring inflation, a weak currency, a cost-ofliving crisis and a potential trade war with the EU in the offing, this is a particularly challenging period to take the reins.

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The prospect of a fully-fledged trade dispute between the UK and the EU is growing in likelihood. The Northern Ireland Protocol Bill has completed its Commons stages and has been introduced into the House of Lords.

Should the Bill become law, it would provide UK Ministers with the legal powers domestically to over-write the NI Protocol and introduce check free, friction free movements of goods East-West and West-East across the Irish Sea for Great Britain and Northern Ireland.

Though the implementation of the new law is still many months away - the EU may respond aggressively with further actions. This may include tariffs on selected UK exports to the EU while attempts to resolve the matter are undertaken by the dispute resolution machinery in the Withdrawal Agreement and Trade and Co-operation Agreement. The British Chamber of Commerce is prioritising a negotiated solution but is advising potentially affected companies to take advice now to mitigate their exposure to new costs on exporting goods to the EU should matters worsen.

It is still unclear how much willingness for compromise there is on the UK side (under the new PM) and from the EU. There is a danger that things could escalate, and that the EU might harden its line further but the noises coming from Ireland right now suggest constructive dialogue might begin soon. Following Liz Truss’s leadership win, Irish foreign minister Simon Coveney struck a more hopeful note. He told Irish broadcaster RTE recently: “I have to say I have some cautious optimism that we will see in a few weeks’ time the opening of an honest effort to try to settle some of these issues that have been outstanding for far too long”. So far there has been no specific comment on how Prime Minister Sunak, may or may not progress things further. To further complicate matters, disagreements over the protocol have stopped the Northern Ireland Assembly functioning and mean new elections may have to be held. Watch this space.

India and Canada

Also, near the top of the in tray for the new Prime Minister, is an intensive series of non-EU trade negotiations. Rishi Sunak has told the Indian Prime Minister Modi he hopes to make “good progress” on finalising a new trade deal, after the Government missed a cut-off point for striking an agreement set by Boris Johnson. Negotiations with Canada for a bespoke trade agreement are expected to conclude by the end of the year to tie-in with UK accession to the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP). Negotiations with the Gulf Co-operation Council, Mexico and Israel will continue but may not conclude until into 2023. Prime Minister Sunak will also be expected to deliver a key export strategy which provides a pathway to stronger export-led growth. The Office for Budget Responsibility forecast in last autumn’s Budget export growth between 8-9% this year. Trade data from the first half of this year puts UK export performance short of that growth trajectory. The BCC is putting plans to the Department for International Trade (DIT) to remedy that and boost export volumes.

Recruitment and training

Filling vacancies remain a major concern for UK businesses – whether their focus is on domestic or export trade.

The number of job vacancies in the economy remains around the highest on record and competition for skills and labour continues to drive up wage costs. The Sunak government is being urged to act quickly. As BCC Head of People Policy, Jane Gratton, warns: “Skills and labour shortages have reached crisis points for many firms. The impact is being felt on their ability to meet customer demand and forcing some to turn away new business, because they simply do not have the human resource. This is restricting growth and business confidence. It is a serious and urgent problem”. Gratton is calling for an immediate review and reform of the Shortage Occupations List (SOL) to include more jobs at all skill levels. This will give firms breathing space to train and upskill their workforce. “We also need to encourage economically inactive people back into the UK labour market through access to publicly funded rapid retraining opportunities”. She adds: “Businesses must be part of the solution too by creating the right workplace conditions, for example by providing flexible working practises, training opportunities and a focus on workplace healthcare and support. “It’s time for action and we’re offering the solution. It’s time for the Government to listen.”

The media is at its happiest when forecasting doom and gloom for our futures. Yes, our Prime Minister (or our latest one!) has got a full in tray of domestic troubles and issues, and just to complement this there is then a growing list of international worries. So doom and gloom, or actually a changing and developing economy? Quite rightly the BCC is showing the creative and positive attitude vital to addressing many of these issues. Wailing, criticising and moaning will achieve nothing, whilst those of us in the business of being constructive and creative will see the opportunities that will be coming through. We will need Government support and action, and the Chambers are ready to be supportive, but it is up to us all to show our strength of mind and business initiative.