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UK-EU Trade: Small and Medium-sized Enterprises

Volume 835: debated on Wednesday 31 January 2024


Asked by

To ask His Majesty’s Government what plans they have, if any, to meet representatives of small and medium-sized enterprises to discuss non-tariff barriers to trade between the United Kingdom and European Union.

I thank the noble Baroness for her Question. We engage extensively with representatives of small and medium-sized enterprises and trade associations across the UK. This includes engagement that I and my fellow Ministers undertake. As Minister for Small Business, Minister Hollinrake routinely meets these representatives and business leaders. As Minister for Exports, I spend a lot of effort meeting SME exporters. We are leading a whole-government effort to break down barriers, including non-tariff barriers with our partners in the EU and across the world.

When the former Prime Minister, Boris Johnson, announced his trade deal with the EU in 2020, he said there would be no non-tariff barriers to trade between us and the EU. That claim has turned out to be spectacularly false, given the extra bureaucracy and costs that many businesses, particularly small businesses, are facing as a result of that deal. As we know, these burdens are due to get worse, not better, in the coming months. Given that in a supplementary question I cannot list all the businesses that I know have been badly impacted, I ask the Minister whether, if I send the details of those firms, his department will look at these things urgently and see in what ways the burdens can be reduced or removed.

I thank the noble Baroness. There is no question that there has been friction in our trade, especially with the EU 27. We have tariff-free trade; a lot of the friction is not of our doing, but we must deal with it.

There is a huge amount of effort going on in the department to break down these trade barriers. We have already removed 178 trade barriers—48 of those are worth £6.5 billion alone. Within all our country embassies we have a team working directly with our SMEs to remove these barriers. This will ease the process.

My Lords, the trade and co-operation agreement has a structure of 24 committees, trade specialised committees included, which are meant to work together to produce mutually beneficial improvements in the process of trade. The snappily named Trade Specialised Committee on Technical Barriers to Trade looks into this area, I assume. That committee met only once last year. I realise that committees can work when they do not meet, but will the Minister comment on the fact that it met only once? Can he assure the House that all of the mechanics of the trade and co-operation agreement are sweating hard to try to improve the situation?

I thank the noble Earl. Yes, indeed, there are many committees in Europe—it is one of the reasons we decided to come out. Where we are working most effectively is country by country, and we are finding that, for example, when we deal with Belgium we can solve the problem with British lawyers working in Belgium. We can do the same in Luxembourg. With Sweden we work hard directly with its team on our chilled and frozen food. With Austria we are working on training permits for our staff to move there. We are much more effective on a country-by-country basis than at the higher committee level.

My Lords, the Minister will have seen yesterday’s reports in the FT that average businesses are facing extra costs of £100,000 to navigate this friction. The Minister has painted a very optimistic and active picture of what his department is doing, but the effects do not seem to be working through. The British Chambers of Commerce and Make UK say that nine out of 10 organisations have seen little progress over the last three years. Does the Minister accept that more has to be done and that perhaps he does have to engage with those committees he just derided?

I thank the noble Lord. We have 5.5 million companies in the UK, of which 3 million are sole traders which operate underneath the VAT threshold. We have 2.5 million SMEs, of which 300,000 export. I meet exporters regularly and what I find when I do the Made in the UK, Sold to the World roadshows in Cardiff, Belfast, Lisburn, Glasgow, Dundee, Birmingham and around the country is that the SMEs are the most innovative when it comes to selling internationally. They are getting around these problems. DBT is working with them. We have a network of international trade advisers who come to their businesses regularly. We have the in-house teams in the embassies. We are working through these issues and, when we move through it, trade will be greatly expanded.

My Lords, does my noble friend recall that when the single market began in the early 1990s, the Secretary of State for Trade and Industry at the time—it was me—made many bullish speeches about the beneficial impact this would have on our exports to the EU. Sadly, over the ensuing quarter of a century, our goods exports to the EU stagnated, growing by less than 1% per annum. By contrast, our exports under WTO terms to the rest of the world grew by 90%. Would it not be surprising if, given that membership was not a great benefit to our exports, leaving would do us much harm? Indeed, the Library figures show that our exports to Europe have held up better than our exports to the rest of the world since the referendum.

I thank my noble friend for sharing his great expertise in this area. As we discussed yesterday, Europe’s share of global trade is declining: it has halved from one-third to 16%, and it is heading towards 10%. That is why we are striking trade deals around the world, such as the CPTPP and with India, which we could not do when in the EU. SMEs are enthusiastically taking full advantage of that. I met a company recently that sells high-end tennis wear to US consumers; when it was built during Covid, it could not sell to Australia because it was too expensive and difficult. Now that we have signed a free trade agreement with Australia, the margins have gone up, the time limit has come down and it is trading successfully there.

My Lords, small businesses have reported that access to export markets has been hindered lately by import licences and EU regulations and they have either retreated or considered retreating to domestic markets. In addition to the Minister’s meetings with exporters, have the Government made any assessment of the impact of such decisions, and what consideration have they given to possible ways of maintaining access to European markets for these businesses?

I thank the noble Lord. As I said yesterday, Europe remains a massive part of our trade—41% with the EU 27 and 48% with the euro 34—and that will continue to be the case. However, the growth areas for our markets will be the US and the rest of the world. SMEs recognise that and are pivoting to the Indo-Pacific region. DBT is putting a lot of effort into helping them get there fast and profitably.

Will my noble friend make sure that there is complete fairness between exports of food and agricultural products from Great Britain to the EU and those from the EU to this country? Will he update the House on the position of seed potatoes? Can we export them directly to the EU at this time?

My Lords, the Minister says that trade with Europe is as important today as it was three years ago, and it is. However, the Government’s refusal to negotiate positively with the European Union is causing major problems for many industries. Is that not what we are hearing from every source other than the Government?

The reality, as we said yesterday, is that our economy is 80% services and 20% goods, but our exports are 50/50, because our goods are good. We make things that people, especially in Europe, want to buy. European countries are coming to us and saying that they want to get rid of these barriers because they want our goods imported. We are working on a country-by-country basis and it is improving all the time.

My Lords, yesterday the Minister admitted to me that UK trade with the EU has declined but said that UK trade in services and goods with the rest of the world was going “gangbusters”. I looked up two things this morning. First, UK trade with the EU has declined by 1.4%, which is regrettable, but UK trade with the rest of the world has also declined, by more than 4%. The second thing I looked up was the definition of “gangbusters”, which means “very well”. Would he like to correct the record? Given that EU trade with the rest of the world has gone up while ours has gone down, why does he think that that is the case?

I thank the noble Lord for that stat-fest. I said yesterday that the most difficult part of the pie chart is the 24% of our manufactured goods to the EU 27, but the other 70% is increasing in particular services, which have gone up by 19% over the last five years, relative to inflation. That is why I said that the rest of our exports are trading very well.

My Lords, will the Minister reassure the House that we will now spend far more time working with the European Union to enhance our trade with our closest trading neighbours, particularly bearing in mind that the EU represents a pretty high proportion of our trade?

I can absolutely assure the noble Baroness of that. My DBT colleague in the other place, Minister Hands, is putting a huge amount of effort into breaking down these barriers with individual European countries, getting faster access and getting rid of the friction in Europe.