Exiting the EU: Businesses in Wales

Ian C. Lucas Excerpts

Wednesday 14th December 2016 Westminster Hall

[Ian C. Lucas (Wrexham) (Lab)]

It is a great pleasure to be here today with you in the Chair, Mr McCabe. I represent a successful manufacturing and exporting constituency with many businesses that export both to and outside the European Union. The terms of trade that apply when those businesses deal with customers from outside the UK are extremely important for their day-to-day planning. As anyone who has run a business knows, certainty is precious and fundamental to the ease of running any business, but the one thing that we lack as far as terms of trade are concerned is certainty. That is a fundamental barrier to running a business in the UK with ease. The Opposition will therefore continue to press the Government to provide more certainty for businesses, so they can start to plan for an imminent massive change.

That change is not just about terms of trade; the regulatory mechanisms that apply to any modern business and its area of operation are also vital. The automotive sector has already been referred to. When I was the automotive Minister, it was important that we had clear environmental regulatory standards that were agreed internationally, because the automotive sector operates internationally. Some people talk about “quickie divorces,” but those will not help businesses that need to plan ahead—to develop new cars to new environmental standards, for example. The international environmental standards that will apply need to be made clear to businesses, but at the moment we have no idea what the mechanism for establishing such standards will be in a post-EU world.

[Stephen Kinnock (Aberavon) (Lab)]

Does that not mean that certainty for businesses in Wales and across the United Kingdom will be conditional on a commitment to a transitional arrangement? We must not have a situation where the article 50 negotiations come to an end in 2019 and we fall off a cliff edge, because that would cause so much uncertainty, not just about tariffs but about the regulatory environment to which my hon. Friend refers.

[Ian C. Lucas]

Indeed. It seems increasingly likely that there will be some kind of transitional phase. I have talked about one set of standards—the environmental standards in the automotive sector—but different regulatory regimes will apply to all sorts of businesses right across the piece. Constructing the mechanisms that will apply to businesses and our relationship with the European Union after we leave will involve a huge amount of work. Regimes will have to be defined for areas such as financial services, broadcasting and pharmaceuticals, and those will have to apply very soon. If those systems are going to be in place within the next two years, we need to provide clarity to businesses that are making investment decisions now. Businesses in Wrexham that I represent, such as Wockhardt and Ipsen Biopharm, which are both exporting pharmaceutical companies, need to know what our relationships will be. If they do not, they may begin to reflect on whether the business environment in this country will be as effective, successful and supportive for them in the future.

My objective for post-Brexit Britain and Wales is for the UK to be as close as possible to membership of the single market, while retaining the right to devise and implement immigration policy. If I were negotiating, that is what I would want. I would love the Government to provide that sort of clarity about its negotiating position. It is really important that we have access to the single market. Membership of the EU and the single market has benefited the Wrexham economy hugely—it has become very much an exporting economy—but the lesson of the referendum is that we have failed to manage migration to the UK. I am clear that we must apply a managed migration policy for EU citizens.

[Wayne David]

Does my hon. Friend accept that there is a need to differentiate between skilled and unskilled labour?

[Ian C. Lucas]

Absolutely. One of my questions for the Minister is: what migration system will apply to EU citizens? We already have a system in place for citizens from outside the EU, and I imagine that if we jump off the cliff that my hon. Friend the Member for Aberavon (Stephen Kinnock) referred to, EU citizens will, by default, be put in the same position as people who come to the UK from outside the EU. However, I have seen reports in the press that the Prime Minister thinks that the points-based immigration system for people from outside the EU that the Labour party introduced when it was in power is not restrictive enough. I would really like clarity on that question from the Government, because we need to have a system in place. In my constituency, we have really important multinational manufacturing businesses such as Kellogg’s and Solvay, whose members of staff travel regularly from mainland Europe to the UK. Those businesses need to know what system will be put in place for them to manage that.

[Mark Tami]

My hon. Friend makes an important point. For Airbus, for example, if a wing is not fully finished in Broughton but needs to be fitted in Toulouse or Bremen, they will send workers, chase the wing and carry on the work that needs to be done. We clearly must not be in a position where they will have to apply for some sort of work permit to do that—that would be ludicrous—but we just do not know what is going to happen.

[Ian C. Lucas]

As my hon. Friend makes clear, there will be a system in due course and the issue will be managed, but we have no idea what the system will be. More importantly, the businesses that will be required to operate it have no idea. This is a massive task. If we are to have a new system—not the points-based immigration system that applies to citizens from outside the EU—the Government must tell business what that will look like, what requirements and burdens they will impose on employers and where responsibility lies.

[Stephen Doughty (Cardiff South and Penarth) (Lab/Co-op)]

My hon. Friend is making a strong speech.

Individuals are also incredibly affected, including constituents of mine who have found that contracts they were meant to be working on in other EU member states in collaborations, and vice versa, have been cancelled because of the precautionary principle, given the uncertainty about what will happen and the risk of not being able to work on the projects in the next five or six years.

[Ian C. Lucas]

My hon. Friend makes an excellent point. The clock is ticking on all these issues—I will sit down shortly because several of my hon. Friends want to make speeches—but what is really ticking is the clock for the Government. It is their responsibility to implement the policy they wish to see on these important matters, which could ultimately undermine confidence in business in our communities and affect the prosperity of our constituents.

We need a bit of straightforward clarity from the Government about the mechanics of what the new systems will look like, and we need engagement from the Government. That is not just about listening but about beginning to tell business what its responsibilities will be and what post-Brexit Wales will look like. That responsibility rests firmly with the Government, who have brought the situation about, and that must be made clear to our constituents. We need to have that clarity as soon as possible.

--- Later in debate ---

[Liz Saville Roberts]

I share the hon. Lady’s concern, not least because the National Farmers Union has presented evidence to the Welsh Assembly that indicates that if the money that reaches Wales from the common agricultural policy were to be Barnettised—to go through the Barnett formula—that would result in a 40% decrease in the money reaching Wales.

To return to the creamery issue, we have yet to see any real clarity on how that will be addressed, and that is of considerable importance to anyone involved in agriculture and the rural economy. As we know, Wales is a net beneficiary from the EU to the tune of £79 per individual a year. Businesses must not be left second-guessing where their future lies and how they can plan ahead.

I will refer specifically to business rates. Businesses in Gwynedd have experienced an average increase of 8.9%, which I believe is the second highest after the county of the Under-Secretary of State for Wales, the hon. Member for Aberconwy (Guto Bebb), who will address us anon. I join my Assembly colleagues in pressing Labour’s Welsh Government to investigate all available powers to ensure that business rates do not penalise businesses. For example, they could use index business rate multipliers to the consumer prices index rather than the retail prices index; variable multipliers, so that small businesses are not disproportionately taxed; three-yearly revaluations, because Gwynedd waited eight years for its most recent revaluation, which had a considerable impact on the increase; and an equitable valuations appeals process. In addition, I strongly urge the Welsh Labour Government to consider adopting Plaid Cymru’s business rates support scheme, which would be likely to benefit tens of thousands of businesses across Wales.

[Ian C. Lucas]

I want to make the point that the delay in the revaluation was because of a decision by the UK Conservative Government. It was nothing to do with the Welsh Labour Government.

[Liz Saville Roberts]

I emphasise that business rates are devolved and that there is great potential for the Welsh Government to use that as a means to support business. Businesses are seeing 100% increases in their business rates valuations under the present arrangements, and that is extremely difficult for them. Plaid Cymru’s scheme would mean that all businesses valued at £15,000 or less would benefit, and those valued at under £10,000 would not pay anything at all. That would be likely to affect 80% of businesses in Wales, and I think some 70,000 would end up paying no business rates at all, which, knowing my local businesses, I am sure would be greatly welcomed.

Businesses are the backbone of the Welsh economy, and with the right support they can be resilient. To enable that, the UK Government need to come clean on their strategy and Labour’s Welsh Government need to use their devolved powers creatively and boldly to do everything to enable Welsh businesses to weather the storm. Every possible safety net must be put in place to mitigate the potentially tempestuous period in front of us, and both the UK Government and the Welsh Government should have a plan to ensure the long-term resilience of Wales.

--- Later in debate ---

[Guto Bebb]

As a Minister in the Wales Office, I fully accept that small businesses have concerns—indeed, all businesses in all sectors of the economy in Wales have concerns—but they also see opportunities, and we have heard precious little on those opportunities in this debate. The Secretary of State for Wales and I have been out dealing with stakeholders regularly—those in the farming industry, the third sector, the university sector and the further education sector; businesses small and large; the Confederation of British Industry; the Institute of Directors; and the Federation of Small Businesses. We have been talking to all those stakeholders. We have been doing that because this change—the decision made by the people of Wales and the United Kingdom to leave the European Union—is huge, so it is imperative that we talk to individuals, businesses and stakeholders who will be affected.

A Government who were arrogant enough to think that they had all the answers are not a Government I would want to be a part of. The fantastic thing about my involvement in the Wales Office since March has been the opportunity to meet so many stakeholders in Wales and listen to what they want from the decision that was made to leave the European Union.

[Ian C. Lucas]

I am grateful to the Minister for showing his usual courtesy in giving way a great deal. Will he give me an example of one opportunity arising from Brexit that the university sector has told him about?

[Guto Bebb]

The hon. Gentleman asks an important question. I have to respond in the same way as some of the hon. Members who mentioned businesses in their constituency but indicated an unwillingness to name them. I was recently in discussion with a university in Wales that saw huge potential to increase its attractiveness to students from outside the European Union; however, it is not a case of either/or. It wants to attract an increasing number of students from outside the European Union, but it also wants to ensure that it keeps the markets that it has in the European Union. These discussions are wide-ranging, and it is fair to say that the responses that we are getting, even from the further and higher education sector, are not as negative as the hon. Gentleman implies.