UK Trade Performance

Debate between Lord Purvis of Tweed and Lord Offord of Garvel

Tuesday 7th May 2024 Lords Chamber

[Lord Purvis of Tweed (LD)]

My Lords, as this month we are likely to see the UK economy moving from recession to stagnation, I can imagine that there were briefings in the department a few weeks ago to show some of the trade figures. There will probably be a collective view from Ministers, saying, “We don’t like those facts and figures; bring us some different ones”, so I am grateful for the alternative facts and figures of the state of British trade to be presented to Parliament.

Unfortunately, as I read the Statement, it had a degree of pathos. It is quite sad that Ministers keep banging on about Brexit, and have not got over some of the grievances they had before and immediately after the referendum. It is rather a pathetic sight to see them making a Statement such as this, with very few people listening.

Many people in some of the key sectors of our economy are looking for action, not rhetoric and Parliamentary Statements. Many of our exporting partners in our key markets are looking for reduced barriers and burdens. I shall come to that in a moment. Primarily our businesses are looking for reduced costs, less bureaucracy and the Government knuckling down to ensure that what has been claimed to be “the world’s best border” actually functions as just a decent one, not one with its processes 20 miles from Dover for likely checks, for whose introduction there has been delay upon delay upon delay.

Any good news about British trade is good news, and I welcome it. I seek the best for our exporting businesses. However, that will not come about through rhetorical Statements such as this. For example, we are told that the UK economy has grown faster than those of Germany, Italy and Japan—without the obvious context that we fell the sharpest and the deepest after Brexit and as a result of Covid. Any recovery at all over that timeframe would be faster. The question is not the speed, but the totality of whether our economy is likely, at the end of this decade, to be bigger than it was before the referendum, or would have been if there had not been a referendum. Every indicator, including the Government admitting this to the OBR, says that on a compound basis, after 4% a year, our economy will be considerably smaller. To say that is not to do down our country; that is just, as the Government might put it, a fact.

The Government have issued a Statement. It would have been useful to have some footnotes with links to the documents. I commend the officials for scouring the UN and UNCTAD, as well as our official government statistics. As the noble Lord said, they have done a grand job of cherry-picking. The UNCTAD trade briefing for the UK shows, for example—this is one indicator—that since 2015 exports are up from £467 billion to £533 billion. That is good, and the Government refer to an increase in exports. What they do not say, however, is that UK imports have gone up much more, from £630 billion to more than £823 billion. The United Kingdom trade deficit in goods has gone up—and not only gone up, but doubled as a percentage of GDP. UNCTAD says that in 2015 it was 1.59% of GDP, whereas in 2022 it was 3.01% of GDP.

The Minister might say that talking about trade deficits is old fashioned, and that our economy is a service-sector economy. However, the trade deficit is very important when we analyse who that deficit is with. It is primarily with China. Yes, that is an indication of the growth in the economy of Asia, but the UK now has the biggest trade deficit with a single country ever in our history. The deficit with China is more than £40 billion. The Minister heard me refer to that.

That puts all the individual references, such as to access to the Mexican market, of £18 million, in perspective. Access to the Mexican market of £18 million is good; I welcome that. But I am more concerned about the fact that the UK has not done a resilience analysis of our key sectors, with an enormous trade deficit of £40 billion—that is £40,000 million—with China. In the context of President Xi visiting Europe, but also Hungary and Serbia, UK trade in the world is now a geopolitical consideration.

The Government have indicated that, as the Statement says:

“We are tearing down the barriers to trade”.


The Minister will probably not be surprised to hear that I disagree with him, and I will not be surprised that he will disagree with me, so we might want to settle with regard to the independent Regulatory Policy Committee, which advises Ministers on this very issue, and its analysis since the period referred to in the Government’s Statement. We can take one example from the 2017-19 Parliament, and I quote directly from the committee. It said:

“For the 2017-2019 Parliament, the relevant government set a … target of a £9 billion reduction in direct costs over the length of the Parliament, however the final position was an increase in costs of £7.8 billion. Similarly, the government has set a holding target of £0 for the current Parliament”—


zero was the holding target for the Parliament we are in—

“but in the first year of the Parliament, there was an increase of £5.7 billion (excluding the very significant impacts of temporary COVID-related measures)”.

This Government have presided over the biggest single increase in business burdens—bigger than any of their predecessors—and the fact that some have been removed, without any reference to the totality of the sum of the 500 referenced in the Statement, is pointless to put in.

My final point concerns what Governments can do to reduce burdens. My noble friends Lord Fox and Lady Randerson have raised repeatedly the increased costs now per British business, of £145 per consignment. This is, I remind the House, “the world’s best border”, and it is a typical cost per business of £100,000 since the new measures have been put in place—but it is also about friction of trade, when it comes to safety and security certificates, customs declarations, evidence of origins of goods, VAT requirements, health certificates and chemical certificates. These are all barriers. I hope the Minister can give an indication now of what the estimated net reduction in British business for trade will be. We have seen that the increase has been £100,000; what is the trajectory down? As I started, British businesses are not looking for boosterism, they are looking for bureaucracy and costs to be reduced and, unfortunately, nothing in this Statement would suggest that they are.

[The Parliamentary Under-Secretary of State, Department for Business and Trade (Lord Offord of Garvel) (Con)]

I thank noble Lords for their response to the Secretary of State’s Statement in the other place. I am very happy to take the points raised, but I must say that I feel we are living in a slightly parallel universe. Let me try to persuade noble Lords that we are in a very privileged position here in the UK. We are the sixth-largest economy in the world and the fourth largest in the G7. We have just moved to being the fourth-largest exporter in the world, after the US, China and Germany. We are the second-largest exporter of services in the world and we have just moved to be the seventh-largest manufacturer in the world.

Our economy is 80% services and 20% goods. That is where our people work: 80% of our employment is in services; 80% of our exports are in services; 20% of our workers work in manufactured goods, yet 45% of our exports are in manufactured goods. What does that tell you? Our goods are very good. They go around the world and people want to buy British goods. Our manufacturing sector has never been in better health. Everywhere I go, every country I visit, they want to buy British goods. There is a clear understanding now about services, so 55% of our exports are in services and the direction of travel will be that this country will be two-thirds services and one-third goods. What is great about services? We do not need to transport them; they can move digitally. They are usually in sectors that pay higher wages and that is why the workforce in the UK is now skilling up into services and getting higher wages.

Take the OECD numbers that were mentioned and let us just remind ourselves what the OECD said in its 2016 report about Europe, indicating that when we joined what was then the Common Market, Europe accounted for one-third of global trade. In 2019, when we left, it was 16% of global trade and by 2050 it will be 9% of global trade. Therefore, putting aside geography and culture, the British people made a very savvy business decision to tilt to where the trade is. The trade is in the Indo-Pacific. We have just joined this thing called the CPTPP, the trans-Pacific partnership. Last time I looked at the map, the UK was not anywhere near the Pacific Ocean. We could not have got into that deal when we were in the EU: that is 15% of GDP and 40% of the world’s middle-class consumers. It feels like a good place to be.

The OECD report looking forward to 2050 says that the three mega economies will, obviously, be the US, China and India. It sounds as if the CPTPP will be a very interesting fourth bloc to be part of, and we are part of it. Coming out of Brexit, we must remember that that was actually a trade deal. We did a tariff-free trade deal with the EU 27 and now, 41% of our exports go to the EU 27. If we include the Europe 34, it is 49% of our exports. It is still our biggest market, with which we are trading very strongly across both goods and services. The US is 20% of our pie chart, while 30% is the rest of the world, and that is where the growth is. We are tilting to where the growth is, while still being able to trade very successfully with Europe.

Looking at the numbers themselves, our exports are worth £862 billion today. We now have numbers we can actually look at, from 2018 to the end of 2023, so that takes in the most difficult five years we have had in the economy in the post-war era. A number of disruptions happened in that period. We had Brexit, Covid, the war in Ukraine, a massive spike in energy prices, a massive spike in inflation, and massive disruption to supply chains, probably the biggest we have seen since the Second World War.

Let us look into the numbers on an inflation-adjusted basis. From 2018 to 2023 our exports were up 26%, but if we take out inflation, they were up 2%. Basically, that means that we are now just ahead of where we were before this massive five-year disruption happened. Our manufactured goods are down 13%, inflation-adjusted, and our services are up 15%. Thank goodness we are a service economy and that we are able to rely on our services. Manufactured goods are down the world over.

The most interesting stat in the whole pack looks at manufactured goods to the EU 27 versus manufactured goods to the rest of the world. Manufactured goods to the EU 27 in this five-year period were down 13%, inflation-adjusted, and manufactured goods to the rest of the world in the same period were down 13%. There is no difference. There is no difference between our trading of manufactured goods to the EU 27 and to the rest of world. However, our services are up 8% to the EU and up 19% to the non-EU—the rest of the world. We have a pie chart of £860 billion, and 24% of that is manufactured goods to the EU 27. That is the only bit that the Financial Times and the BBC will report on. I am here to tell you that the other 76% is going—we have used the word in this Chamber before—gangbusters, so that must mean that the Government are doing something right to drive the economic agenda forward. Therefore, I can clearly refute the idea that we are in a difficult place. We are actually undergoing a massive recovery post Brexit and post Covid.

We have talked about the trade deals. On our EU exit, we immediately had 65 trade deals that we rolled over from the EU. We have now got that up to 73. What is interesting about the new deals? They are the most progressive in the world. Let us take the Australian trade deal. The EU did not really bother with services; it was fixated on manufactured goods. Now, the Australian trade deal has chapters on services, digital, innovation and digital trade. We have just passed the Electronic Trade Documents Act; we can now send goods around the world without paperwork. We have just sent a bunch of valves from Burnley to Singapore without any paperwork. We are bringing in a single trade window in 2025; instead of filling out 28 forms, you fill one out once and it cascades down through the system. We are putting in place a digital border, which will be the most progressive in the world. It will give us the value of £3 billion over the next five years. Yes, there will be some costs along the way, and yes, we need our borders to be protected, particularly from an SPS point of view. Our farmers think it is an unfair playing field right now and that imports versus exports in agri is not a level playing field. We are putting that in place, and in a very light-touch, careful manner.

Wherever I look in my portfolio, I see good news. If we are talking about world trade, we have these 73 trade deals; that covers 60% of world trade. Our target was 80% of world trade; well, the missing 20% is the USA, which is not doing trade deals with anybody right now, so it is not personal. We are trading very well with the US right now; in fact, our exports to the USA are at record amounts, both services and goods, and it may well be that that is good to continue as is.

Eight MoUs were signed with eight states. If you talk to Andy Burnham, recently re-elected as a Labour mayor, about the MoU with North Carolina and what the northern powerhouse is doing direct with North Carolina, he loves it; he is not talking it down, and he is not complaining about there not being an FTA with the USA. Right now, you can see that what they want in Manchester is a direct link to North Carolina based on mutual recognition of qualifications; it is to do with digital and the direct links he can make between his northern powerhouse and North Carolina. What we are hearing back is, “What a clever thing the UK has done”; we are dealing with individual states rather than getting bogged down in Washington.

If we take that as the missing 20%, we effectively have free trade with 80% of the world’s trade. We are in a very strong position when it comes to business investment; we do not need to go through all the numbers. We know that Alastair Campbell was on record saying that, following Brexit, Nissan will leave. What has it done? It has invested all the more—another £4 billion in its plant in the north-east. Some £2 billion of government investment has been matched by £24 billion from the private sector. Is that not the point of government? The Government are a pump-primer. The Government do not do business; the Government should not be doing business. The Government should be an enabler and facilitator for the private sector to do business. So, £2 billion of pump-priming results in £24 billion of investment; that is a pretty good deal.

India is clearly a big market. Right now, it is only 2% of our exports, but it will be a very big market for us to deal with. We have done 95% of that deal. Guess what? In any negotiation, the last 5% is the most difficult. Right now, India has an election on, so that has stalled at the moment—stalled is the wrong word, so please do not quote me on that; it is awaiting them to come out of purdah. But we have closed 13 rounds and 26 chapters on a whole range of issues with India, which does not really do free trade. What we are doing with India is groundbreaking.

When it comes to steel, we have net zero targets. We all agree on net zero targets, do we not? We must move to the new way of creating steel—electric arc furnaces. We must remind ourselves that we do not have iron ore here in the UK, so in Port Talbot 8,000 jobs are at risk. We have done a deal to save 5,000 and put in place a £500 million package for the other 3,000. I come from Clydeside, where we shut down the shipyards, and we did not have that deal; there was no furlough scheme. Here, a deal is being done with government to work on an industry going through transition—meeting our net zero targets, moving to electric arc furnaces, and saying that we cannot save every job, but we will invest in 5,000 of the 8,000 and work out a plan to help with the 3,000 redundancies. That is a pretty good deal.

I think I have covered most of the points. At the end of the day, the UK economy is the fourth largest in the G7. Our numbers are good, and our forecasts for growth are good. In November 2022, the OBR expected a year-long recession and GDP to fall; in fact, the economy grew in 2023 and inflation has more than halved and is falling fast. That is good for business. We should remind ourselves that, at the end of the day, GDP is a meaningless measure, except for economists. You cannot eat your GDP; GDP is an output. I have yet to meet a business that say when they get up in the morning that they are going to increase their GDP today. I have never met a household that says, “How is your GDP doing today, in terms of your budget?”

We should deal with the fact that, in 2023, people’s real incomes were £1,200 higher than the OBR expected in its March forecast. Real household disposable income per capita is higher today than it was in 2019, when we came out of the EU. In terms of our workforce, 33 million people in our population of 66 million work and produce a tax revenue of over £1 trillion. By increasing the national minimum wage and upskilling our workforce, the number of workers in our economy who are on what was called low hourly pay is now 8.9%. In 2010, that was 21%. Benefits in 2010 were the largest source of income for the poorest working-age households, whereas under the Conservatives their wages are now the highest contribution. Is that not what matters?

What matters is how we put food on the table. We are upskilling our economy. We are a service, modern, post-industrial economy. Where our manufacturing is world-class, it has been protected by this Government and invested in by the private sector. In the meantime, our service economy is going gangbusters, our workers are being upskilled and our SMEs are exporting and becoming exemplars in their local communities. Our economy is doing very well and I commend the Secretary of State’s Statement to the House .

UK-EU Trade: Small and Medium-sized Enterprises

Debate between Lord Purvis of Tweed and Lord Offord of Garvel

Wednesday 31st January 2024 Lords Chamber

[Lord Offord of Garvel (Con)]

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.

[Lord Purvis of Tweed (LD)]

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?

[Lord Offord of Garvel (Con)]

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.

UK-Canada Trade Deal: Suspension of Negotiations

Debate between Lord Purvis of Tweed and Lord Offord of Garvel

Tuesday 30th January 2024 Lords Chamber

[Lord Offord of Garvel (Con)]

Cheese is now a pawn in the game, and that has now become the focus of attention. When we were in the EU, we had 2,000 out of 14,000 tonnes of cheese allocated to us. That has now been taken away and allocated to Europe—France and Germany, mostly. We are now allocated 6,000 for the rest of the world. Canada knew that we had a right to roll that over to 2,000 within the WTO trade agreement. We do not have that now. That is £18 million of trade. Out of £26 billion, one might say that is a small number, but we know that the farms in Somerset and Wales in particular, which produce incredible quality cheese, have built up a superior market share in Canada. The Canadian consumer wants this cheese and has been buying and stockpiling it for six months in advance of this happening. This has only happened because the Canadian farmers want to send hormone beef to the UK and we refuse to drop our standards, as some people said we would do when we left the EU.

[Lord Purvis of Tweed (LD)]

My Lords, among the letters I received from Ministers after every trade negotiating round with Canada, saying everything was on track, the letter telling me that things had gone off the rails—sorry, “paused”—must have gone astray. That information that the Minister gave is not new information. I warned the noble Lord, Lord Johnson, last summer, after I led a CPA delegation on trade to Ottawa and Toronto, of the difficulties—but he ignored them. That is compounded by the fact that businesses are now paying £100,000 more per business for trade with Europe and new checks will be coming into place tomorrow. So when does the Minister forecast that we will have frictionless trade with Europe?

[Lord Offord of Garvel (Con)]

With Europe, as the noble Lord knows, when we agreed to join what was then the European Common Market, Europe accounted for one-third of global trade. We all know that, when we left in 2019, that was 16% of global trade. In 2050, the OECD says it will be 9% of global trade. So the UK has tilted to where the market is. The market is in the Indo-Pacific, which is why we joined the CPTPP. The last time I looked at the map, Britain was not anywhere near the Pacific. We managed to get America’s place in the CPTPP, which is 40% of the world’s fastest-growing consumers. As we sign those trade deals and go around with Vietnam, Indonesia, Korea and Japan, we are building out a trade base for our farmers and manufacturers which is far greater than they had in Europe.

Comprehensive and Progressive Agreement for Trans-Pacific Partnership

Debate between Lord Purvis of Tweed and Lord Offord of Garvel

Thursday 20th July 2023 Lords Chamber

[The Parliamentary Under-Secretary of State, Department for Business and Trade and Scotland Office (Lord Offord of Garvel) (Con)]

Noble Lords, it is a momentous occasion to be able to talk in this House about the signing of the CPTPP. This is a tongue twister, but we are all going to have to get our mouths around it because we are going to hear a lot more about this in the future. This is a massive region of 11 countries in the Indo-Pacific, which account, together with the UK, for 15% of world trade GDP.

We know that this trade deal originally had the US in it, and Donald Trump took the US out. That created a gap. For those of us who play the game of rugby football, you always go for the gap. The UK has taken that gap and got into this deal, which, to come to the specifics of the question, will in no way impact on our food standards and regulatory standards.

On the matter of China, China is not a member of this group. China has expressed some interest, but there are other interested countries such as Costa Rica, Ecuador, Uruguay, the Philippines and Korea that are in line before China. So, as far as we are concerned, at the moment we are not commenting on China’s accession. China has expressed an interest but, on the exact question, there will be no reduction of food standards and general regulation through this deal.

[Lord Purvis of Tweed (LD)]

My Lords, I very warmly welcome the 0.08% estimated growth over 15 years of this momentous agreement. But, with regard to China, it is more than simply expressing an interest; it is seeking to commence the accession process. If that happens, we will be bound to share data with China under part of the CPTPP common data provisions. That will mean that we will no longer have data adequacy with the European Union. We currently have a trade deficit in goods with China of £43 billion. Would it not make more sense to have eased trade with Europe rather than more trade deficit with China?

[Lord Offord of Garvel (Con)]

Some 45% of our trade in the world is with the EU. In fact, if you take Europe as now being 34 countries—if you take the likes of Norway, Switzerland, Israel et cetera—it is pushing 50% of our trade, whereas China is £100 billion, which is more like 10%. So we are very clear that our primary market is with Europe and the first deal we did on Brexit was a free trade agreement with Europe. So we have free trade with Europe, as we stand, and that will continue to be our dominant market. This is the bonus that we get from going to international markets that we could not get access to before. If we were inside the EU, we could not have signed this deal, just as we could not have signed a deal with India. When you have 28 people wanting 28 different things, it is difficult to negotiate, is it not? Here we have a deal with the CPTPP which we would not have access to otherwise and I think we should celebrate.

As to the number on GDP, we are talking about a £2 billion impact on trade, which is a big, big number. It will go all around the UK, not just to London and the south-east. I can give you a breakdown of the numbers in every region, if the noble Lord needs it. The fact is that it will be a dynamic deal. This is going to be the fastest-growing consumer sector in the world. It is going to have a big increase in GDP. As the Secretary of State said at the press conference, it is up to us now. It is up to the UK now to maximise the benefits of this deal and I am very convinced that we will get great trading opportunities out of it.