UK Export Performance

Aaron Bell Excerpts

Monday 18th September 2023 Commons Chamber

[The Minister for International Trade (Nigel Huddleston)]

I beg to move,

That this House has considered UK export performance.

Back in January, the Prime Minister laid out his five priorities, high among which was to grow the UK economy, creating better-paid jobs and opportunity right across our country. To do that, he brought the Government’s business expertise and world-class trade negotiators together under one roof at the new Department for Business and Trade, beefing up our teams, refocusing our energies and better targeting our resources to support businesses and drive growth. Indeed, growth is the key to unlocking everything we want for our country. It is at the very heart of everything that this Government are doing, and there is no better way of achieving it than by exporting.

Naysayers may try to claim otherwise, but we are already in a strong position. Last year, the UK was the world’s fifth largest exporter, up from sixth the previous year. The value of the goods and services sold by our businesses overseas hit £849 billion in the 12 months to July, an increase of nearly 16% in current prices over the 12 months, and our trade deficit almost halved from September last year to this June. We also sell more services overseas than any other economy on the planet bar the USA, and those exports hit an all-time high in 2022.

Let us not forget that all these successes have come at a time of unique global challenges, from Putin’s illegal war in Ukraine to the covid recovery. UK businesses have responded with incredible resilience in the face of persistent global trade shocks.

[Aaron Bell (Newcastle-under-Lyme) (Con)]

The Minister mentioned the UK’s performance in services. We are the third largest country in the world for artificial intelligence, behind only the US and China. Does he agree that investing in our services and exporting them will become only more important as we move towards the AI revolution?

[Nigel Huddleston]

I could not agree more. That is why in our trade deals we have such a laser focus on developing services. We need to play to our strengths. Our goods are world class, but it is in services, which account for more than 70% of our economy, where we see huge potential growth. As I travel around the world, I see great enthusiasm and recognition of incredible quality in our service sector that we have not yet fully exploited. That will be a key area of focus for the Government.

The past few years have been not only testament to British businesses’ resilience and adaptability, but proof of the strong demand for UK goods and services around the world. As the UK’s International Trade Minister, I have seen that appetite at first hand. Last month, I was in Vietnam. I saw how our service exporters are already providing valuable services to Vietnam’s growing economy, from the British Council expanding education opportunities for Vietnamese students to UK architects and engineers transforming Ho Chi Minh City’s skyline. I saw how, over the coming years, there will be even more opportunities for UK businesses to trade with a nation that is set to become the world’s 20th biggest economy by 2050.

--- Later in debate ---

[Gareth Thomas (Harrow West) (Lab/Co-op)]

This debate takes place 12 months on from the last Prime Minister’s kamikaze Budget, which was cheered by so many Members on the Conservative Benches. It made the cost of living crisis much worse, biting into the pockets of every family in Britain, and made tough conditions to do business even tougher. That Budget was not a one-off; we have now had 13 years of economic failure, five Prime Ministers, seven Chancellors, each one worse than the last, with the business environment getting harder, barriers to trade going up, increasing red tape and the driving up of costs, and cuts in business support making it tougher for Britain’s exporters. Indeed, the former exports Minister, the hon. Member for Finchley and Golders Green (Mike Freer), said just last summer that Ministers were not doing enough to help firms to send goods overseas.

In 2012, the Conservative party pledged to reach £1 trillion-worth of exports by 2020. It has not happened yet, and it does not look like it is going to happen in the next five years either. Indeed the Office for Budget Responsibility thinks it will not happen until 2035, 15 years late.

As my right hon. and learned Friend the Leader of the Opposition has repeatedly underlined, growing our economy is crucial to ending one of the bleakest periods in our country’s recent economic history and to delivering again the hope of a decent job and better prospects for all those wanting to work and their families. Exports are fundamental to that mission. Jobs linked to exports pay on average higher than average wages in the UK. So I welcome this debate, even if the analysis the Minister set out bears little resemblance to the frustrations countless business leaders have shared with us on this side of the House about the record of recent Ministers on exports.

The OBR, the Bank of England and the National Institute of Economic and Social Research have all predicted that exports will drop this year. I hope they are wrong because, when exports decline, jobs, investment and wages all decline too. If— Labour is determined to deliver this—we want the highest sustained growth in the G7, accelerating growth in our exports is fundamental. However, in the 13 years since 2010, British export performance has been outperformed by every member of the G7 apart from Japan. Figures from the House of Commons Library and from the United Nations—specifically, the United Nations Conference on Trade and Development—show that Canada saw a 10% growth in its exports of goods and services from 2012 to 2021, the last decade-worth of figures that are available, while the US saw growth in its exports over that period of almost 14%, Italy almost 16%, France over 16% and Germany almost 23%—but Britain, just 6%. Over the same decade, the EU as a whole saw growth in its exports of goods and services of almost 30%. Perhaps the Minister winding up this debate will tell the House why he thinks other countries of similar wealth and status have been doing better at exporting their goods and services than us. One of last year’s Prime Ministers, Boris Johnson, thought poor export figures were down to a lack of ambition from businesses themselves; I hope the Minister does not share that view.

Hidden deep in the last White Paper on trade was the admission that, while the share of global goods exports has dropped for most G7 countries, the UK share appeared to have declined faster than most. What was striking about that admission is that Ministers offered no explanation for it, and the situation does not appear to have got any better. Figures compiled in the UK by our own Office for National Statistics reveal that, since just before the general election, UK goods exports to some of our biggest markets have dropped significantly: to Germany, our second biggest market, exports of goods have dropped by 7.5%; to France, our nearest neighbour—our fifth most important market—our goods exports are down over 6% since the election; goods exports to Spain have seen a 9% drop; and to Sweden a 5% drop. There certainly does not seem to have been any attempt across Government to understand why others are doing better than us at exporting.

International Monetary Fund data suggests that, since the last election, every other member of the G7, in sales to key export markets near to us, is performing better. British exports of goods and services to Germany are down by 17% since May 2019. To France, they are down by 14% since May 2019. American, Canadian and Italian exports to France and Germany are all up by over 20%. Even Japan is doing better than we are at selling goods and services to France and Germany since the general election.

But it is trade with India that perhaps most tellingly lays bare the steady relative decline in Britain’s trading performance. Despite better figures on services, our exports of goods to India actually declined over the last decade. This is a country where Britain has a long and deep history. There are many barriers to trade, but it is extraordinary that other countries have been able to increase their exports of goods while Britain has not.

These figures make it all the more surprising that Ministers cut support to help businesses get to trade shows, find new markets and win their first export contracts. The Government cut support in recent years to trade bodies wanting to run their own trade missions, and they cut direct support, too. The trade show access programme—the key support for businesses new to exporting—had its funding cut so much that only 10% of the number of businesses that were helped by the programme under the last Labour Government appear to be getting help from this Secretary of State’s trade show access programme.

At the last general election, exporters and the wider British public were promised by the Conservatives that 80% of all trade would be conducted under the free trade agreements that Ministers would have signed by now, and that a trade deal with the US, our biggest market for goods and services, was going to happen by the end of last year. Neither has happened. We were promised a deal with India last year by Diwali. Will there be one by Diwali this year? Indeed, most of the deals that have been signed by Ministers were roll-over deals—cut-and-paste jobs. Ministers have routinely exaggerated the benefits of the trade deals they have negotiated for exporters.

While the deals that Britain has signed with Japan, Australia and New Zealand are welcome, particularly for geopolitical reasons, the quality of the negotiating effort by Ministers has hardly been inspirational. The deal with Japan, according to the impact assessment, appears set to benefit its exporters four times more than British exporters. The former Environment Secretary, the right hon. Member for Camborne and Redruth (George Eustice), admitted that he thought that Britain, when negotiating the trade deal with Australia,

“gave away far too much for far too little in return”.—[Official Report, 14 November 2022; Vol. 722, c. 424.]

While any increased opportunities for trade are welcome, at just 0.07%, 0.08% and 0.02%, the new trade deals with Japan, Australia and New Zealand will not lead to huge boosts to Britain’s economic growth or to great surges in exports. Even the CPTPP will only boost exports enough to see a 0.08% increase in our GDP.

Talking to businesses and their representatives, there is widespread frustration with the trade deal that the Conservatives negotiated with the European Union. The Institute of Directors underlined that almost 50% of its members found the UK’s trading relationship with the EU challenging. The British Chambers of Commerce, Make UK and the Federation of Small Businesses all highlight the real difficulties that their businesses are still having in getting their goods and services into European markets. Without changes, the trading arrangement with Europe will continue to compound the challenges our exporters face and risk cementing further the Government’s record of low growth and higher taxes. Ministers have been too slow to recognise the problems in the trade and co-operation agreement, and far too slow in trying to address them. The failure to sort the rules of origin issue for our car manufacturers, which the previous debate addressed, is just the most pressing example.

We on the Opposition Benches are determined to improve conditions for trade with Europe to make Brexit work. We will not rejoin the single market or the customs union, but we will use the 2025 review of the trade and co-operation agreement to push for better terms of trade.

[Aaron Bell]

I am interested to hear what the shadow Minister has to say about the Brexit situation and renegotiating with the EU, because in the Financial Times at the weekend, we see that “Keir Starmer pledges to seek major rewrite of Brexit deal”, when in 2020, The Guardian’s headline was, “Labour will not seek major changes to UK’s relationship with the EU”. Which is it? Why is the Leader of the Opposition proposing to extend further uncertainty on British businesses, who are busy getting on with exporting around the world?

[Gareth Thomas]

I am not sure whether that was one of the questions that the Whips gave out to the hon. Gentleman, but I have made it clear that we will not rejoin the single market or the customs union, but we will seek to use the 2025 review to push for better terms of trade. We will seek to negotiate a veterinary agreement with the EU to help in particular hard-pressed food, farming and fishing businesses. We will accelerate efforts to secure mutual recognition agreements to make it easier for our professionals to work in EU markets.

Specifically on Europe, many businesses are concerned by Ministers’ plans to unilaterally extend a Windsor framework requirement for food and drink to be labelled “not for EU” this time next year when goods are sold across England, Scotland and Wales. They are particularly concerned because many say that they were not consulted. This measure will apply to a large share of food products in shops, including meat, dairy, pet food, fish and fruit and veg. Given that businesses are warning that this could increase costs, as they will not be able to supply identical products for sale in both EU markets and the UK, it would be good to know which businesses and business groups were consulted, and what their views were.

The biggest challenge and opportunity that Britain faces is climate change. British businesses could be at the heart of the race to net zero. Indeed, the global transition to green technologies is projected to create new industries worth £1 trillion by the end of this decade alone. However, when the Secretary of State called net zero targets “arbitrary” and “unilateral economic disarmament” only last year and could not deliver even one new offshore wind farm in last week’s energy auction, we are not exactly in the best place to take the climate science innovation of British businesses, universities and other innovators and export them to the rest of the world. We on the Opposition Benches would create a nationwide network of climate export hubs to support every region in the country to secure new skilled jobs and opportunities from green trade. In particular, we need to make sure of help for trade and exporters in every region of the UK. Only 1.4% of exporters are from the north-east and less than 5% are from the midlands.

There is remarkable talent in every part of our country, yet wages here no longer keep pace with the hopes and dreams of the British people. The Government are delivering one of the worst rates of economic growth of any country in the G7. Their own Ministers believe they are failing British exporters. It does not have to be this way. Our ambition on the Opposition Benches is for a dynamic trading Britain, where businesses are not held back by Government negotiating failure or a lack of support at key moments. There are exceptional businesses in this country, and they deserve better than what Ministers are offering. Instead of pushing up trade barriers and pushing away investment, and instead of cutting support to businesses to export, we on the Opposition Benches will back British exporters. We will have the back of British exporters.

[Aaron Bell (Newcastle-under-Lyme) (Con)]

It is a pleasure to follow the shadow Minister. I can assure him that I am quite capable of highlighting Labour’s flip-flops and U-turns by myself, but I thank him for the insinuation, and for the suggestion that I might be up to writing questions for the Whips one day.

I start by thanking both Ministers on the Government Front Bench for their engagement with Newcastle-under-Lyme businesses in the past year. The Minister for International Trade, my hon. Friend the Member for Mid Worcestershire (Nigel Huddleston), who opened the debate, came to visit, I think, six constituencies in Staffordshire on a whirlwind tour earlier this summer. He visited Langley Alloys in my constituency, which has 70% of its turnover overseas, in countries ranging from Brazil to New Zealand—a country with which we have signed a genuinely revolutionary trade deal in recent months. The Under-Secretary of State for Business and Trade, my hon. Friend the Member for Thirsk and Malton (Kevin Hollinrake) welcomed a number of impressive businesses from Newcastle-under-Lyme down here to Westminster for a business roundtable either towards the end of last year or early this year, and I thank him for his engagement on that.

The way that the Department for Business and Trade is working to support individual firms in areas across the country, including areas in need of levelling up such as Newcastle-under-Lyme, is testament to how this new Department is working across the entire country to support exports, and I welcome that. Exports are now back to pre-covid levels, and the Department’s export strategy is working. It looks like we are target in the race to £1 trillion by 2030. It is a challenging target, but the rates we have seen in recent years suggest we will be able to reach it.

In dealing with the European Union, this Government under the Prime Minister’s leadership have been smoothing over a number of the residual issues from the EU. I think we can all concede that, due to a little bit of bad faith on both sides, the process of getting the deal with the EU was not as smooth as we would have liked. However, with the Windsor framework we are seeing an improvement in trade with Northern Ireland. The Horizon deal only two weeks ago was hugely welcomed by the scientific community with what it implies for our scientific and artificial intelligence industries, which I mentioned earlier, and our services in the future.

I was with the Science, Innovation and Technology Committee in America last week. We visited Boston and Washington DC to speak about artificial intelligence in the light of our current inquiry into the future governance of AI. When we were in DC, I met UK Research and Innovation, which has an office there. It is clear that it is doing a huge amount of work to prepare the ground for investments by Britain in America, and conversely investments by American firms in Britain—building links in the technologies of the future. Of course, the USA remains this country’s single biggest destination for exports, with £168 billion of exports in 2022, the majority of which is in services.

I will touch a little more on what we heard last week. The Americans are very impressed with where we are on artificial intelligence and think that our proposed model of regulating by the use of AI—we are working through this from the White Paper—rather than, like the EU, trying to regulate the concept of AI, is the right way to go. We heard repeatedly from lawmakers, the Administration and businesses that they welcome the summit that the Prime Minister will host at Bletchley Park in November.

That brings me to the Minister’s point about how important digital agreements are for the future. We have signed a digital agreement with Singapore and included significant digital chapters in the deals that we have done with Australia, New Zealand and Japan.

The free trade agreements that we have been proposing are possible only because of Brexit. As the Minister said, we have signed 73 of them—a number of them are roll-over agreements, but a number of them are new—and of course we have signed the deal with the EU. These free trade deals offer British businesses, including those in my constituency of Newcastle-under-Lyme, new opportunities. I know that the Department is working with businesses to help them both to understand the mechanics of the free trade agreements and to realise the opportunities of them. Although the numbers may start small, free trade agreements are additive, because each year more firms get into exporting, so their true benefits come in the long term. For example, we project more than £3 billion for the Australia and New Zealand deals by 2035. Of course, by signing up to the CPTPP, we have even more opportunities for businesses.

Although this is an export debate, we should highlight that trade deals are good for UK consumers too. By joining the CPTPP, we will see lower prices on imports of things such as fruit juices from Chile and Peru in South America, and chocolate from Mexico. Trade deals therefore work for British consumers as well as British exporters. The Government are delivering for businesses, resolving the issues we have seen with the EU and opening new markets.

However, as I suggested in my intervention on the shadow Minister earlier, I fear that Labour wants to return the country to all the uncertainty that we had from 2016 to 2019. It is pretty clear from reading the previous remarks of the Leader of the Opposition that Labour’s ambition is to unpick and ultimately reverse Brexit, as well as to sign up for hundreds of thousands of additional migrants from the EU, as we saw last week. I quoted those two headlines, with the FT saying, “Starmer pledges to seek major rewrite of Brexit deal”. I think that is the last thing that businesses and politics need. We have come to a period of stability after the turmoil following the referendum in 2016; we do not need to go back to those times. Of course, he said in 2020 that Labour would not seek major changes to the UK’s relationship with the EU.

That, I am afraid, is yet another flip-flop from the Leader of the Opposition, but given that he campaigned to remain and stood up at Labour conference calling for a second referendum with an option to remain, I do not think we should be surprised. How can anybody trust what he says? I have no sympathy politically with the people on the Labour left, but he has reneged on all the commitments he made to them when running for the Labour leadership. He stitched them up like he wants to stitch up the British people, and that gives him no credibility and no integrity when it comes to negotiating for Britain.

There have been many returnees to the shadow Cabinet in recent weeks—they refused to serve under the right hon. Member for Islington North (Jeremy Corbyn) because of the tolerance of antisemitism in the party at the time, but the Leader of the Opposition served willingly. He even said:

“I’m not going to rank Jeremy Corbyn. He’s a colleague and a friend and he’s led us through some really difficult times in the Labour party.”

But the shadow Chancellor, the shadow Home Secretary, the shadow Health Secretary and the new shadow Work and Pensions Secretary refused to serve under the former leader. They did the right thing, but I am afraid that the Leader of the Opposition did the expedient thing. He has tried to pull the wool over people’s eyes about that. He is trying to do that again on Brexit and for British businesses. We must not let him get away with it.

--- Later in debate ---

[Afzal Khan (Manchester, Gorton) (Lab)]

I thank the committed colleagues on both sides of the House who are here on a quiet Monday evening for their contributions to the debate. It has provided an important opportunity for us to recognise that, for all the Government’s talk about signing free trade agreements across the world and bringing British businesses a step closer to selling to new markets with fewer hurdles, the UK’s export performance is not actually looking very promising. I ask Conservative Members who are advocates of trade and exports to look carefully at their own leadership. If they did so, they would realise how much Britain and British industry have been let down.

Let us look at the facts. The Office for Budget Responsibility predicts that exports will fall this year and again next year, and that over the next three years, with more of the same Tory failure in our economy, the UK’s growth will be weak at best. Tory Governments are quick to claim that they are the “the party of business”, but when I talk to businesses in the city of Manchester and across Great Britain, that is not what I hear. The Prime Minister and his Government, and all those Prime Ministers of the last few years who came before him, promised “growth, growth, growth”, but what do exporting businesses see? They see out-of-control inflation, no progress on trade deals, and a Government who not only do not take their concerns seriously, but sometimes cannot even be bothered to meet them to hear those concerns. They see failure after failure, and because of all that, Britain is set to be 15 years late in achieving its £1 trillion export target.

The Government claim to believe that only trade can create jobs, drive growth and deliver the long-term prosperity that communities across the UK have been crying out for, but when it comes to delivering it, they are nowhere to be seen. It is true that the UK has started negotiations for trade agreements with some of the world’s largest and growing economies such as the US, India, Canada, Mexico, the Gulf Co-operation Council, Israel and Switzerland. We left the European Union in 2020. How many of these trade deals have been concluded? None.

The fact that we have been unable to conclude a deal with one of our closest allies, the United States, is frankly embarrassing, yet the Prime Minister freely admitted on his way to meeting President Biden that a trade deal with the world’s largest economy was not “a priority”. That says it all, doesn’t it? Despite the UK’s deep and historic ties to India, the Prime Minister failed to make any progress on a trade deal there last week. I guess that was not a priority either. And in Europe, our next-door neighbour and largest trading partner, UK businesses are far less competitive and swamped in red tape because the Government failed to get a decent Brexit deal. Again, not a priority. So long as trade and exports are treated as unimportant by the Government, there will be no new markets, goods exports will continue to fall and UK businesses will suffer. The last time more than 30% of businesses saw increased export sales was at the end of 2018, almost five years ago.

[Aaron Bell]

I am grateful to the hon. Gentleman for giving way. I very much enjoyed our trip to the United States earlier this summer as part of the British-American Parliamentary Group exchange. He will know that the reason there is not a trade deal with America is because of the state of American politics and the protectionism we have seen from the Democratic Administration through the Inflation Reduction Act. Also, America is unlikely to negotiate a free trade deal in the run-up to the presidential election next autumn, but that does not mean that this Government are not ambitious for that deal in the longer term. I welcome the hon. Gentleman to his new role, but he has to appreciate that trade deals take two to tango. This country has always prioritised free trade and we will do as many deals as we can with like-minded countries.

[Afzal Khan]

I thank the Member for his intervention. I too enjoyed our trip together—I learned so much about the American system—but can I remind him that that trade deal was in his manifesto?

The truth is that British exporters are at the end of their tether with this Government, and with the meagre support services that our Department for Business and Trade is providing. They find themselves unable to access up-to-date information and they are struggling to find guidance on how best to get their goods out into the world. It is worth noting that trade and export are not about big businesses. They are about the small and medium enterprises that make up 99.9% of UK private sector businesses. These businesses bear the biggest brunt of the Tories’ hopeless approach to improving export performance. Between April and June of this year, over half of all SME exporters saw no change in overseas sales, and almost a quarter reported a fall in sales. That is 16 million people employed in SMEs who are being failed by the Tories, but as my hon. Friend the Member for Harrow West (Gareth Thomas) set out at the beginning of the debate, it does not need to be this way.

Businesses of all sizes should be able to have faith in a Government who work for them, who are pro-trade, pro-business and pro-workers and, crucially, who take a leading role in driving exports from towns and cities across the UK. A Labour Government would not only introduce a binding duty on trade negotiators to help deliver economic opportunities across the whole of the UK; we would also ensure that each new trade deal was accompanied by a regional strategy with support for businesses, maximising the benefits from trade deals across our nations. Sadly, this is not the Tory Government’s priority.

So much needs to be done to restore the faith of British businesses in our trade and export capabilities, and to show the world that the UK is open for business. I am afraid that, once again, the Tory party has shown that it is just not up to it.