Labour calls on government to take “five steps to back British business” as Brexit deadline looms
Labour calls on government to take “five steps to back British business” as Brexit deadline looms
Now that the UK has reached a new Trade and Cooperation Agreement with the EU, Labour is calling for urgent action to help British businesses prepare for significant changes to their operating environment on January 1st.
The new agreement was finally concluded on December 24th, just a week before the Brexit transition period ends and businesses face new rules.
Labour’s shadow Chancellor, Anneliese Dodds, is calling on government to take “five steps to back British business” as a matter of urgency:
- Immediate answers to businesses’ outstanding questions: The Government must recognise the difficult situation many firms face – with questions still remaining over issues like rules of origin and future regulatory cooperation – and immediately put in place a comprehensive communications campaign to help businesses prepare and provide the clarity they need.
- A commitment to boost British supply chains: Given the deal the UK has struck on rules of origin requirements, there is a risk that some firms will still be subject to new tariffs. The Government must urgently mitigate the impacts of any additional tariffs arising from the new rules of origin requirements included in the final deal. Longer term, a number of measures must be enacted to ensure that firms can and do use British businesses in their supply chains.
- Regulatory forbearance to help firms transition to new rules: With just days to go until new rules come into effect, businesses will require a proportional approach when adapting to the changes, based on raising awareness and driving compliance rather than punishing breaches. This period of forbearance should be temporary and kept as short as possible.
- A step change in the recruitment and training of customs agents and officials: The Government initially promised up to 5,000 extra customs officials and estimated that some 50,000 customs agents would need to be recruited ahead of the end of the transition period. Neither target seems to have been met. Plans to support the training and recruitment of both customs agents and officials must therefore be urgently accelerated.
- Financial support for those firms that are hardest hit: The Government must make clear how extending its coronavirus loan schemes will genuinely help firms affected by the end of the transition period, and amend terms where necessary. It should also urgently repurpose and re-energise its secretive ‘Project Birch’ programme to support strategically important firms impacted by Brexit. And it must work urgently with ports that were awarded significantly less than they hoped for from the Ports Infrastructure Fund.
Anneliese Dodds said:
“The fact that a catastrophic no-deal scenario has been avoided means that many businesses across the country are now breathing a sigh of relief.
“But the Government’s irresponsible, eleventh-hour approach to the negotiations means there are many questions still unanswered with just days to go until the end of the transition period.
“After a year of unprecedented upheaval, that puts even more pressure on businesses which are now facing a highly uncertain start to the new year.
“The Government must urgently take five steps to back British business: clear communications, a commitment to British supply chains, regulatory proportionality, the customs capacity we need and financial support for the worst-affected firms.”
Notes to editors
Further information on the five steps Labour is calling on the Government to take:
1. Immediate answers to businesses’ outstanding questions
The eleventh-hour nature of the deal means that businesses will have significant questions that still need to be answered if they are to comply with new rules that come into force on January 1st. They need to know what the deal means for the movement of goods, people and data between the EU and the UK, and the impact on their supply chains – in particular the specifics regarding rules of origin and future regulatory cooperation. It is highly irresponsible of government to have left it this late to provide much-needed information to businesses. Labour is clear that this lack of preparedness is not the fault of business, but rather the result of a poor communications strategy by the government coming on top of a crisis response that has consumed firms’ capacity. Businesses today will still have many unanswered questions ahead of the end of the transition period on December 31st. The Government must recognise the difficult situation many firms face and immediately put in place a comprehensive communications campaign to help businesses prepare and provide the clarity they need.
2. A commitment to boost British supply chains
The Government must urgently mitigate the impacts of any additional tariffs arising from the new rules of origin requirements included in the final deal. More broadly, the Government must do more to ensure that firms can and do use British businesses in their supply chains, both increasing UK-based jobs and ensuring our manufacturing sector is more resilient.
This should involve looking at areas where large employers can pass on the government incentives they receive to smaller firms in their supply chain which are otherwise not eligible. This has been promised for the Apprenticeship Levy and must urgently be put into practice. Labour has already called for unspent levy funds to be used to pay the wages of young apprentices for the next six months, to support the economic recovery – this is even more urgent in the light of Brexit.
Other incentives – such as investment allowances, R&D tax credits, export finance guarantees – could also be made more flexible so that they directly benefit smaller firms in supply chains. Government could also return to its abandoned proposal to improve speedier payments for supply chain firms.
Longer term, the Government should strengthen the UK’s trade defences so that UK manufacturers of essential components and materials – like steel and ceramics – are not undercut by unfair overseas competition. And it should make supply chain support a fundamental part of existing sector deals and extending those deals to cover a wider range of sectors.
Page 8 of the Government’s summary of the UK-EU Trade and Cooperation Agreement covers rules of origin and states that the UK-EU trade agreement involves bilateral cumulation (cumulation of both materials and processing) between the UK and the EU. It does not involve “diagonal” cumulation covering inputs from other third countries with whom either side has a trade deal. That could result in new tariffs being applied to goods moving between the EU and the UK.
Labour called for the reallocation of unspent Apprenticeship Levy funds in its Green Economic Recovery report, published in November.
3. Regulatory forbearance to help businesses transition to new rules
Even with the best will in the world, with a matter of days to go until the end of the transition period and an incomplete set of guidance to work with, businesses will understandably struggle to comply with every new rule when it comes into effect. Government must look urgently at those areas where it is appropriate to offer businesses a degree of leniency rather than imposing fines. The focus should be on raising awareness and driving compliance rather than punishing breaches. This could include, for example, temporarily waiving the £300 fine for EU and UK hauliers arriving at the Channel ports without the correct paperwork. This is obviously a far from ideal scenario, and arises from the Government’s last minute approach to the negotiations, and so Government should do all it can to keep this period of forbearance as short as possible and to make clear to firms that it is only a temporary arrangement.
4. A step change in recruitment and training of customs agents and officials
The government has repeatedly failed to answer question as to how many of the additional 50,000 private sector customs agents that are estimated to be needed under the new system have actually been recruited.. With insufficient attention having been paid to training and skills, it is not clear that there are enough qualified personnel available in the UK as a whole – which means an imbalance of supply and demand, driving up costs for businesses that need customs advice. On the public sector side, the Government promised two years ago that it would aim to recruit an extra 3,000-5,000 customs officials in advance of the end of the transition period, and yet in October 2020 the tax and customs body HMRC has just sixteen more staff than it had five years previously. The Government must urgently accelerate its plans to support the training and recruitment of both customs agents and officials if businesses are to be supported appropriately in adjusting to the new rules.
5. Financial support for those firms that are hardest hit
The Chancellor has announced that government-backed loan schemes originally introduced in response to Covid-19 will now be extended to the end of March to allow Brexit-affected firms to apply – deliberately conflating the external impact of an unprecedented pandemic with the impact of deliberate policy choices made by the Government as part of its Brexit negotiations.
Extending the application window for these schemes only answers part of the problem, and only for some firms. The Government has not increased the size of the loans available, so firms who were badly affected by Covid and will now be impacted by Brexit may have already used up all their available support. Similarly, the Government has not announced any changes to repayment terms nor clarified whether lenders will have more discretion over the granting of new loans to businesses that have already had to take on significant additional debt throughout the last year.
The Government must make clear how extending guaranteed loans will genuinely help firms affected by our departure from the EU, and amend the terms of its scheme where it becomes clear they don’t. And it should consider if additional support may be needed beyond that.
The Government’s secretive ‘Project Birch’ scheme has so far failed to deliver on its intention to support strategic industries affected by the pandemic, with only one firm having received any support months on from the project’s launch. As more of our most important sectors are likely to face disruption due to the last-minute Brexit deal, the Government needs to urgently repurpose and re-energise Project Birch so that it can support firms impacted by our departure from the EU.
The Government’s Port Infrastructure Fund was launched in October, with a commitment that successful bids would be announced “shortly after” the deadline closed on October 30th. In fact, allocations were only announced last week, and many ports discovered they had been given significantly less than requested given the fund was hugely oversubscribed. Ports now have almost no time to adapt their plans in the light of this delay and disappointment. Government must work urgently with affected ports to put in place contingency plans that will enable them to be operationally ready by the time new rules come into effect.