Exiting the EU: Businesses in Wales

Debate between Stephen Kinnock and Geraint Davies

Wednesday 14th December 2016 Westminster Hall

[Geraint Davies (Swansea West) (Lab/Co-op)]

It is a pleasure as always to serve under your chairmanship, Mr McCabe. As has already been said, there is great uncertainty about Brexit among the business fraternity across Wales. If article 50 is, in fact, triggered on 31 March 2017, the remaining EU27 countries will determine the deal that we have to live with, no matter what has been said in this Chamber and elsewhere. There is a natural concern that that deal will be in the interests of those 27 countries and others that are not leaving the EU.

There is the spectre of tariffs. Some people have said there will not be tariffs because we import more than we export. However, only Germany and the Netherlands have a net trade surplus with us, so other countries may have an incentive to impose tariffs. Indeed, German car makers may want to block, for example, Japanese car makers that use Britain as a platform to launch into Europe. Of course, that is why there has been an under-the-table deal with Nissan, which has been referred to, while several other large conglomerates have naturally come forward to ask for money to offset prospective tariffs.

As I said when I intervened, it is particularly important that Welsh businesses and all people relying on exports to the EU have a level playing field and subsidies and support, so that they can continue their terms of trade after Brexit—assuming that Brexit goes ahead. My constituency of Swansea West is part of the wider Swansea Bay city region, where 25,000 people’s jobs involve exporting to Europe. Alongside that, there is obviously a farming community that is helped by the common agricultural policy, which may be under threat, and we also benefit from billions of pounds of convergence funding. I am looking to the Minister to provide assurances on all those things—namely, the level playing field, the matched convergence funding and, indeed, what the farmers may need in CAP.

A big employer in my area is Swansea University, which is an engine and an asset for economic growth. It has now doubled in size with the new bay campus in the constituency of my hon. Friend the Member for Aberavon (Stephen Kinnock). It is a jewel in the crown of engineering research and development capability across Europe, and the problem is that we may not be able to maximise our opportunities of utilising that; it is not only an asset for young people to grow and learn, but for producing innovative products for export.

[Stephen Kinnock]

The European Investment Bank played a critical role in funding the bay campus, which is indeed one of the jewels in the crown of Welsh higher education. Does my hon. Friend agree that some assurance on how to deal with our exiting from the European Investment Bank is desperately needed from the Government?

Leaving the EU: Wales

Debate between Stephen Kinnock and Geraint Davies

Tuesday 25th October 2016 Westminster Hall

[Nick Thomas-Symonds (Torfaen) (Lab)]

rose—

[Geraint Davies (Swansea West) (Lab/Co-op)]

rose—

[Stephen Kinnock]

I will give way once more, to my hon. Friend the Member for Torfaen (Nick Thomas-Symonds), but then I must make some progress.

--- Later in debate ---

[Stephen Kinnock]

I am, Mr Bailey.

I thank the hon. Gentleman for his intervention. My sense is that we are moving firmly off topic with that intervention, but delivering value for taxpayers’ money is a top priority for all Governments, including the Welsh Assembly Government. In light of the unemployment figures coming out of Wales at the moment, which are certainly going in the right direction, along with a range of other economic indicators, I would argue that the Welsh Assembly Government are definitely providing value for money for Welsh taxpayers.

[Geraint Davies]

Does my hon. Friend agree that Wales faces a triple whammy? First, we start from a position of generating only 70% of average UK GDP per head. That is why, secondly, we get multimillion-pound investment that we are about to lose. Thirdly, given the advent of tariffs that we are so dependent on and the inward investment that has just been attracted, we will end up in a situation where we lose trade and grants and start from a weak position that will be catastrophic for the people of Wales.

[Stephen Kinnock]

I agree absolutely with my hon. Friend. In many ways, this debate is about resilience. The resilience of the Welsh economy in relative terms is weaker compared with that of many other parts of the United Kingdom. With the impact of Brexit, the loss of funding and inflation—the weakening of the pound will send inflation up, and we know that the poorest are always hardest hit by inflation—his reference to the triple whammy is an apt and correct way of describing what is happening.

The third reason why the pledge is not as powerful as it appears is that the Government have not yet agreed with other EU Governments that UK-based applications for EU funding will be in any way affected. The EU funding programmes for 2014 to 2020 are well under way—they have either already been launched or are in the advanced stage of planning. I fear that the Government’s antagonistic behaviour towards the EU and their lack of clarity over future funding will harm the prospects of Welsh applications.

Fourthly, the Government appear to have no plan for how the underwriting of funding will work at a small business or charity level, which is so important. Fifthly, even if Westminster does replace EU funding, there are serious considerations as to how that will be done and calculated. The Government will likely be tempted simply to increase the funds available on the basis of the Barnett formula. However, as the Welsh Labour Government have made abundantly clear, the Barnett formula has disadvantaged Wales for years, and we simply cannot afford or accept such chronic under-investment any longer.

At a minimum, the chosen approach to replacing EU funds must be ring-fenced—it must be in addition to the block grant. Beyond that, a revision of the Barnett formula is long overdue. In short, there is no clarity and no confidence for the people of Wales. The Government must urgently make it clear that they will underwrite all project funds agreed in the 2014 to 2020 mechanism. They must make it clear that they will maintain EU levels of annual funding to Wales for at least a decade post-Brexit, and they must set out how the replacement of funds will work in practice for the Welsh Government and local organisations in the spectrum of Brexit scenarios.

Also, the Government must commit to including Welsh voices in the negotiations, especially with regard to other themed EU funding programmes such as the Erasmus student exchange programme or the Horizon 2020 higher education innovation partnership. Of particular concern to south Wales is the future of the UK relationship with the European Investment Bank, whose loans have helped to build the Swansea bay campus; improved the Welsh Water and Severn Trent network in 2015; and upgraded the Great Western mainline. The last loan was worth £430 million. Such institutions matter greatly to us. The head of the bank, Werner Hoyer, has already publicly made it clear that current levels of lending to the UK cannot be maintained after Brexit. Welsh voices must be heard in the negotiations as our future so critically depends on those relationships with the continent. The Government must make clear whether they will seek associate status to the programmes and institutions. They must bring clarity quickly as the futures of people, communities and organisations across Wales hang in the balance.

Although it looks likely that the entirety of the UK will suffer economically in the coming years as a result of Brexit, it is in many parts of Wales where it will hit hardest, as our economic resilience is relatively low. That does not take into consideration the impact of Brexit on the steel industry, which would be hugely endangered if EU tariffs are imposed on it. If investment in Wales is not maintained, vital projects will go under, followed by businesses. People will lose jobs, and unemployment and welfare bills will shoot up. Communities will fracture. Port Talbot and its people have been through enough. That does not have to be our future.

In Port Talbot, Aberavon and across south Wales we are seeing the enormous potential to accelerate what we are doing. There is innovation. One company, SPECIFIC, has developed a steel-based paint that acts as a solar cell to generate power. It could turn every building in the country into a power station—except perhaps for Boris’s Foreign Office. The Swansea bay tidal lagoon is a world-leading project to capture wave energy. The Swansea bay city region proposal, Internet Coast, could transform south Wales into one of the best digitally connected places in the world. All that is being done without any sign of a proper industrial strategy. Imagine if we actually had one.

Alongside the Government’s Brexit negotiations, they must also present a modern industrial strategy, backing skill development, innovation, modern manufacturing, sustainability and the digital revolution. The strategy must focus on regions such as south Wales, where we have so much underdeveloped talent. When the Welsh Secretary declares that we should not simply replace EU money with Westminster money because we have to address underlying issues, we have to laugh. First, of course we need to address the underlying issues. Unlike him, I am unwilling to settle for basic skills. I am ambitious to ensure my constituents have the high skills needed for new industry to flourish in south Wales. Secondly, it seems blindingly obvious that financial support is a precondition for building such industries and developing skills. Finally, it was very nice of the Welsh Secretary to say that publicly, but it is his Government’s responsibility to come up with the solution, so he may wish to get on with it.

The Government must recognise with humility and sobriety rather than the gung-ho hubris they have shown so far that, if Wales does not continue to receive funding for crucial programmes, communities will be devastated for generations, with everything that that means for people’s lives. It will result in a lack of security, a lack of dignity and a lack of hope. I therefore hope that the Government will reassure the people of Wales quickly that they will ensure the floor is not ripped out from underneath them.