The UK Economy & Brexit: what does it mean? Christian Spence - PowerPoint PPT Presentation

Sefton Economic Forum The UK Economy & Brexit: what does it mean? Christian Spence Head of Research & Policy Greater Manchester Chamber of Commerce www.gmchamber.co.uk/ research www.gmchamber.co.uk/ research

UK Output and Consumer Demand ONS data GDP and Sectoral Growth Rates Retail Sales Manufacturing Construction Services GDP (RHS) Value Volume 15 6 120 115 10 4 110 5 2 105 0 0 100 -5 -2 95 -10 -4 90 -15 -6 85 -20 -8 80 2007 Q2 2009 Q2 2011 Q2 2013 Q2 2015 Q2 2007 APR 2009 APR 2011 APR 2013 APR 2015 APR Source: ONS Preliminary Estimate of GDP, October 2016 Source: ONS Retail Sales, September 2016 www.gmchamber.co.uk/ research

UK Demand QES UK Sales LiverpoolManufacturing NWManufacturing UKManufacturing LiverpoolServices NWServices UKServices 80 80 60 60 40 40 20 20 0 0 -20 -20 -40 -40 -60 -60 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Source: LSCC QES Q3 2016 Source: LSCC QES Q3 2016 www.gmchamber.co.uk/ research

International Demand QES Export Sales LiverpoolManufacturing NWManufacturing UKManufacturing LiverpoolServices NWServices UKServices 120 120 100 100 80 80 60 60 40 40 20 20 0 0 -20 -20 -40 -40 Q2 2007 Q2 2009 Q2 2011 Q2 2013 Q2 2015 Q2 2007 Q2 2009 Q2 2011 Q2 2013 Q2 2015 Source: LSCC QES Q3 2016 Source: LSCC QES Q3 2016 www.gmchamber.co.uk/ research

Labour Market QES Employment (this quarter) LiverpoolManufacturing NWManufacturing UKManufacturing LiverpoolServices NWServices UKServices 100 100 80 80 60 60 40 40 20 20 0 0 -20 -20 -40 -40 -60 -60 Q2 2007 Q2 2009 Q2 2011 Q2 2013 Q2 2015 Q2 2007 Q2 2009 Q2 2011 Q2 2013 Q2 2015 Source: LSCC QES Q3 2016 Source: LSCC QES Q3 2016 www.gmchamber.co.uk/ research

Confidence & Investment QES Investment Plant & Machinery Plant & Machinery LiverpoolManufacturing NWManufacturing UKManufacturing LiverpoolServices NWServices UKServices 80 50 40 60 30 40 20 20 10 0 0 -10 -20 -20 -40 -30 -60 -40 Q2 2007 Q2 2009 Q2 2011 Q2 2013 Q2 2015 Q2 2007 Q2 2009 Q2 2011 Q2 2013 Q2 2015 Source: LSCC QES Q3 2016 Source: LSCC QES Q3 2016 www.gmchamber.co.uk/ research

Costs & Prices QES Price Intentions LiverpoolManufacturing NWManufacturing UKManufacturing LiverpoolServices NWServices UKServices 80 80 70 70 60 60 50 50 40 40 30 30 20 20 10 10 0 0 -10 -10 -20 -20 Q2 2007 Q2 2009 Q2 2011 Q2 2013 Q2 2015 Q2 2007 Q2 2009 Q2 2011 Q2 2013 Q2 2015 Source: LSCC QES Q3 2016 Source: LSCC QES Q3 2016 www.gmchamber.co.uk/ research

• Costs & Prices QES Price Pressures Raw Materials Exchange Rates LiverpoolManufacturing NWManufacturing UKManufacturing LiverpoolManufacturing NWManufacturing UKManufacturing 100 100 90 90 80 80 70 70 60 60 50 50 40 40 30 30 20 20 10 10 0 0 Q2 2007 Q2 2009 Q2 2011 Q2 2013 Q2 2015 Q2 2007 Q2 2009 Q2 2011 Q2 2013 Q2 2015 Source: LSCC QES Q3 2016 Source: LSCC QES Q3 2016 www.gmchamber.co.uk/ research

Sefton Economic Forum Brexit and the Future of International Trade www.gmchamber.co.uk/ research

Brexit and the Future of International Trade 1.Continuing relationship with the EU • Article 50 negotiations • Exit options • “Soft” and “Hard” Brexit? 2.The future of international trade • Tariffs vs. Regulations • Bilateral vs. Multilateral www.gmchamber.co.uk/ research

1. Continuing Relationship with the EU What are the options? • EEA/EFTA based-option – (Something similar to Norway) • Full participation in single market – nothing much changes in terms of trade. • No direct say over EU matters, but we would gain a seat on global regulatory bodies. • The framework required is already in place (an “off -the- shelf” option) • Bilateral Deals – (Something similar to Switzerland) • Multiple bilateral deals with the EU on specific aspects of trade. • More scope to tailor specific arrangements. • Must accept some EU law in return – bargaining involved. • Time and effort intensive – would be a start from scratch. • Something more bespoke • Could be significantly time and effort intensive • Would likely be based upon existing framework • Could be difficult to negotiate • World Trade Organisation – all ties with EU severed www.gmchamber.co.uk/ research

1. Continuing Relationship with the EU “Hard” Brexit? Or “Soft” Brexit? • Not particularly useful terms – no clear definitions. • Government seems to be leaning towards “hard” at this point. • But are they increasingly seeing it as the finishing line instead of a first step? Transitional arrangements are key. www.gmchamber.co.uk/ research

2. The Future of International Trade Tariffs Vs. Regulation • What do we mean by “trade deal”? • The trade deals we keep hearing about only deal with monetary tariffs. • These are the 53 that the EU has with non-EU countries. • These are the ones being spoken about by Liam Fox (mostly). • Non- tariff barriers (NTBs) are the real issue… • The EU has around 38 NTB deals with the USA and 63 with China, but none specifically on tariffs . • The WTO option would see us lose these agreements, WTO rules alone are not enough. • If you are not talking about regulation, you are not talking about trade… www.gmchamber.co.uk/ research

2. The Future of International Trade Bilateral Vs Multilateral • Bilateral trade deals (between two countries) are increasingly outdated • Globalisation is increasingly multilateral (agreements that apply to all who are signed up) • Through global regulatory bodies, a global single market is taking shape . • United Nations Economic Commission for Europe (UNECE) • Codex Alimentarius – setting global food and agriculture standards • International Labour Organisation (ILO) • The EU is increasingly a rule-taker not a rule-maker • The future of trade is in International Regulatory Cooperation • Britain can be at the forefront of this movement outside the EU – a real opportunity to lead global trade. www.gmchamber.co.uk/ research

Final Thoughts • Brexit is a process, not an event… • Article 50 gives us an initial negotiation of 2 years • Where should we be at the end of this? • What would the next steps be? • Can a bespoke arrangement be achieved in this time? • Securing EU Trade relations is vital • We need a solid footing from which to progress… • International trade is changing… • Britain could become the leader in International Regulatory Cooperation… • It’s time to think big… • What other opportunities are there to be had? www.gmchamber.co.uk/ research

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Sefton Economic Forum The UK Economy & Brexit: what does it mean? Christian Spence Head of Research & Policy Greater Manchester Chamber of Commerce christian.spence@gmchamber.co.uk | @GMCCResearch www.gmchamber.co.uk/ research www.gmchamber.co.uk/ research