Customs Union membership critical for North East jobs

Catherine spoke in today’s backbench business debate on the Customs Union in the Commons,  highlighting the importance of remaining in the Customs Union for North East businesses and jobs. Her speech can be read below.

Catherine McKinnell: I agree with much of what has been said today, but I want to talk specifically about my own region, because nowhere in Britain will be harder hit by Brexit than the North East. It is projected that as a result of the Government’s preferred outcome of a comprehensive free trade agreement, growth in the North East could take a 11% hit, whereas if we ended up with the alarmingly possible no-deal scenario, there could be a staggering 16% hit.

We are significantly more exposed to the risks of a bad deal—or, indeed, no deal—than other parts of the country. The North East is the only region in England with a consistent surplus in goods and services trade with the EU. We export 60% of our goods and services to European markets, which is a larger proportion than any other region. Many thousands of valuable local jobs rely on a good Brexit deal that would secure frictionless, two-way access between Britain and the EU. Without that access, those jobs will be at risk, and given that we have one of the highest unemployment rates in the country, that is something that our local economy simply cannot afford.

Helen Goodman (Lab, Bishop Auckland): I agree wholeheartedly with my hon. Friend. Is she as alarmed as I am that those projections would result in unemployment in our region rising to 20%, meaning 200,000 people without work?

Catherine McKinnell: It does not bear thinking about. I and my hon. Friend are not alone in our concerns. Last July, when the North East Chamber of Commerce, which represents more than 3,000 businesses of all sizes across the region, conducted a survey of its members, 88% of respondents said that they wished to remain in some kind of single market and customs union. Unsurprisingly, the proportion is even higher among those who export solely to the EU.

The confusion and uncertainty is particularly felt by small and medium-sized enterprises in the North East, especially those that currently export only to the EU and have no idea what the future holds. The situation has certainly not been improved by rumours that the Department for International Trade will in future provide support only to firms with a turnover of more than £4 million. I hope that the Minister will disabuse people of that concern.

The chief executive of the North East Chamber of Commerce, James Ramsbotham, wrote to the Secretary of State for Business, Energy and Industrial Strategy in February to express his concerns about the forecasted harmful effects of Brexit on the North East and the Government’s strategy to mitigate them. More than two months since he wrote that letter, he is still waiting for a reply. It is worth quoting from his letter at length:

“I was not surprised that the biggest potential impact is on North East England. As you know, we are the region with the best record at trading with the rest of the EU: an achievement delivered by many Chamber members. It is to be expected that anything which makes doing business with Europe harder will have a greater impact here. I am, however, very disturbed that Government has so far failed to adequately allay the obvious concerns this has created among our members, even before these assessments became public.

You will recall the Government was elected last June on a manifesto that said closing the gap between London and other parts of the UK is ‘the biggest prize in Britain today’, a ‘great endeavour’, and that the Conservative Party was ‘determined to lead the way in the next Parliament’. These forecasts suggest the gap will not reduce but grow significantly wider. If there are figures being shared around Whitehall that suggest your Government’s stated top priority could be seriously undermined, I would expect to see some concerted action to tackle it.

I assume that Government must expect a better outcome from Brexit than that indicated by these forecasts, otherwise you would not be going through with this plan. Given the manifesto commitments mentioned above, I also assume that you expect it to be at least as good for North East England, if not better, than for London. I therefore assume you must have some evidence to support this. It is beyond time for some more frank communication from Government so we can understand the basis of this confidence.

In light of these forecasts, Government should re-think its position on leaving the Customs Union. It seems clear that to do so will exacerbate the risks to the economy, particularly in our region. The freedom to pursue independent trade deals with other countries will present opportunities—but it will also present significant risks, involve great complexity and require huge capacity building. We have not yet seen any evidence to suggest that the opportunities can genuinely be greater than the negative impact of disrupting trade with our nearest markets.

If there is sufficient evidence to show there will be benefits from leaving the Customs Union, then there should be consideration of extending the implementation period. The time to put in place the capacity to deliver such trade deals, and the time for businesses to adjust to new terms of trade and respond to a signal that they should prioritise different markets, is perilously short.

In the meantime, we should be seeing significant investments going in to the support structures to help businesses make these adjustments, and in to the agencies that must manage major new processes—not least HMRC. At present we do not see this and businesses have very limited sources of expert advice available.”

It is difficult to imagine a more damning assessment of the Government’s approach. It is shocking that these calls for clarity, from a body that speaks on behalf of the North East’s business community, have so far been ignored. I fear that that confirms that the Government do not have our region’s best interests at heart, or that they simply have their head in the sand.

I want to end by asking the Minister a fundamental question: how do the Government intend to close the gap between London and the North East when all the evidence suggests that their Brexit policy – and leaving the Customs Union – will very clearly only widen it further?