To ask His Majesty’s Government, following the speech of the Governor of the Bank of England at Mansion House, what measures they are taking to increase the export of goods to the European Union.
My Lords, in his Mansion House speech, the Governor of the Bank of England observed that Brexit has weighed on the UK economy, particularly in goods trade. The previous Government’s Brexit deal imposed new trade barriers on business and, according to the Office for Budget Responsibility, permanently reduced GDP by 4%. That is why the Government are committed to resetting our relationship with the European Union, to strengthen ties and to tackle barriers to trade.
My Lords, I thank the Minister for his response, and indeed for not mentioning that black hole—which is perhaps surprising, since the latest figures from the ONS show that our goods exports to the EU have fallen from £175 billion in 2018 to £153 billion last year, which is a drop of £22 billion. Not only that, our goods exports to the rest of the world over those same five years have fallen from £184 billion to £162 billion—yes, another £22 billion black hole. Does he therefore agree that these figures demonstrate a deeper-rooted weakness in our goods trading performance rather than simply Brexit being to blame?
I thank the noble Lord for his Question and for mentioning the £22 billion black hole. He is absolutely right to point to the consequences of the previous Government’s ill-conceived Brexit deal. It imposed new trade barriers on business equivalent to a 13% increase in tariffs for manufacturing and a 20% increase in tariffs for services. As a result, the Office for Budget Responsibility has found that the overall trade intensity will be 15% lower than if the UK had remained in the EU. Specifically, goods exports to the EU have fallen significantly, down 19%—or £42 billion—compared with 2018. Of course, he also raises the correct point that we must increase our trade right around the world, because increasing trade is good for increasing growth.
Has my noble friend the Minister had the opportunity in his very busy day to read the article in the Financial Times this morning by the very perceptive commentator Janan Ganesh? He pointed out that, 10 years ago—long before the black hole was observed—we in the United Kingdom stood at the crux of three interlapping economic relationships: the United States, China and the European Union. We were in a formidable position. Since then, we have lost two and are possibly about to lose the third. Does that not make it all the more imperative that we start to rebuild those relationships, starting with the European Union?
I agree 100% with my noble friend. I have not had the opportunity to read that article yet, but I absolutely will on his recommendation. He is right that the strength of those relationships is vital. As the Chancellor said in her recent Mansion House speech, we
“will always do what is in our national interest for our economy, for our businesses and for the British people”.
As she also said, the European Union is by far our biggest trading partner.
My Lords, it is very good to hear from the Minister about maybe pivoting to a closer relationship with the European Union. What does he think the new Administration in the United States should take from that inference, given the prospective trade and tariff war with that country?
My Lords, renewing—or rekindling—the relationship with Europe is very important. Does the Minister agree that one of the ways to make that harder is for UK product regulation to diverge from EU product regulation? Can the Minister confirm that we will work hard on the Product Regulation and Metrology Bill to make sure that we have an avenue to stay close to that EU market?
My Lords, what is the timetable is for addressing these concerns? The creative industries have been hit particularly hard by Brexit, losing revenue in trade with Europe on daily basis. There is, or should be, a real urgency about this.
I completely agree with the noble Earl. The creative industries, along with many others in our country, have been hit particularly hard by Brexit. We have identified the creative industries as part of the EU reset, identifying touring visas in particular as one of the priorities. The Prime Minister met with the President of the European Commission in Brussels on 2 October, and they have agreed to strengthen the relationship between the EU and the UK, putting it on a more solid and stable footing. We will now work with the EU to identify areas where we can strengthen co-operation for mutual benefit. Obviously, we recognise that delivering new agreements will take time, but we are ambitious, have clear priorities and want to move forward at pace.
My Lords, what precise steps are the Government taking to increase the number of trade agreements with non-EU countries, such as those that the previous Government negotiated including of course with the CPTPP, which noble Lords will be aware represents the fastest-growing economic region in the world?
As the noble Lord knows, we have acceded to that partnership already. At the G20 this week, the Prime Minister spoke about reopening negotiations with India. In the spring, the Government will publish a trade strategy, in part to reset our relationship with the EU, but also to support more small businesses to export and remove barriers to trade right around the world.
My Lords, the last Government wrecked the economy and our relationship with our biggest trading partner, all on the back of the idea that there were loads of trade deals out there to be done. They failed to do them, and those that they did damaged the farming industry in the UK.
I agree with some of my noble friend’s sentiment; I am not entirely sure what the question is. However, it is important to recognise the significance of the EU to our trade. Four of our top five export markets are in the EU, and eight out of the top 10. The EU accounts for nearly 50% of our trade; total trade with EU is worth over £800 billion and 41% of total exports go to the EU.
My Lords, will the Minister confirm that part of our loss of trade to the global world outside the EU has been because, since Brexit, we can no longer guarantee to meet European standards for products, and because going through European supply chains was usually our entry point to meet final clients for independent exports? Both those routes have now been damaged.