Key Focus: UK Economy
The government published its assessment of the impact of a no-deal Brexit on business and trade last Tuesday the 26th of February.
The report: ‘Implications for Business and Trade of a No Deal Exit on 29 March 2019’ said "some food prices are likely to increase" and customs checks could cost business £13bn a year in a no-deal scenario.
It also said there was "little evidence that businesses are preparing in earnest". But the government said it had undertaken "significant action" to prepare for no deal on 29 March.
The government's report, which was drawn up for the cabinet, said: "One of the most visible ways in which the UK would be affected by delays in goods crossing the Channel is our food supply, 30% of which comes from the EU."
Possible disruption to cross-Channel trade "would lead to reduced availability and choice of products", the document said.
"This would not lead to an overall shortage of food in the UK, and less than one in 10 food items would be directly affected by any delays across the short Channel crossings.
"However, at the time of year we will be leaving the EU, the UK is particularly reliant on the short Channel crossings for fresh fruit and vegetables.
"In the absence if other action from government, some food prices are likely to increase, and there is a risk that consumer behaviour could exacerbate, or create, shortages in this scenario.
"As of February 2019, many businesses in the food supply industry are unprepared for a no-deal scenario."
It repeated analysis suggesting a no-deal scenario could leave the UK economy 6.3% to 9% smaller after 15 years, compared to what it would have been. It said the worst-hit areas economically in a no-deal scenario would be Wales (-8.1%), Scotland (-8.0%), Northern Ireland (-9.1%) and the north east (-10.5%).
Significant findings of the no-deal impact assessment include:
- The economy could be 6-9 percent smaller over the next 15 years that it might have been otherwise
- The flow of goods through Dover would be “very significantly reduced for months”;
- Food prices are likely to increase and panic buying may create shortages;
- Of the 40 planned international trade agreements, only six have been signed.
Prime Minister Theresa May has said that the next vote on her Brexit deal would happen by March 12. If that fails, there will be a vote the following day to support no deal, and if that also fails, another vote would be given on extending article 50 and delaying Britain’s exit from the EU.
Weekly News Highlights
A No-deal Brexit risks a 'full-blown economic crisis' according to industry bodies
- The risk of a no-deal Brexit is turning into a "full-blown economic crisis", the aerospace trade body ADS has warned.
- The ADS Group said it was now able to track "the very real economic damage being caused" by the continuing uncertainty over the UK's exit from the EU. ADS, the aerospace and defence trade group, represents some of the largest companies operating in the UK, including Airbus, Boeing and BAE Systems.
- ADS Chief executive Paul Everitt said its members needed a "firm transition period and negotiations on the UK's future relationship with the European Union commenced at the earliest opportunity".
- The warning from ADS comes as the UK’s leading insurance trade body, the ABI, said that a no-deal Brexit "would be an unforgivable act of economic and social self-harm".
- Huw Evans, director general of the Association of British Insurers, suggested last Monday that "as a last resort" Brexit should be subject to a short delay if no deal is the only alternative. He also warned that a no-deal Brexit “would be an unforgivable act of economic and social self-harm that the UK would live to regret”
- His comments come amid growing anger among many business groups over the continuing uncertainty. The Institute of Directors' interim director general, Edwin Morgan, said: "There is too much at stake to run down the clock and risk an accidental no-deal. Businesses have lost all faith in the political process and as those first in the firing line of no-deal, they deserve to know more."
Net migration to the UK from countries outside the European Union have their highest level for 15 years, according to latest migration stats from the ONS published last week
- Figures show 261,000 more non-EU citizens came to the UK than left in the year ending September 2018 - the highest since 2004. In contrast, net migration from EU countries has continued to fall to a level last seen in 2009.
- And separate figures released by the Home Office show the number of EU nationals applying for British citizenship hit an all-time high last year, rising by 23% to about 48,000.
- In the year to September, a total of 627,000 people moved to the UK and 345,000 people left the UK - a net migration of 283,000, ONS figures show.
The ONS report also showed:
- More citizens from Central and Eastern European countries known as the EU8 - which includes Poland, Slovakia and Lithuania - are leaving the UK than arriving. This pattern differs from all other EU countries
- The number of people coming to the UK for work has fallen to its lowest level since 2014 - this follows a fall in the number of EU citizens arriving to work
- More people are coming to the UK to study, with non-EU student immigration at its highest level since 2011
Jay Lindop, director of the Centre for International Migration at the ONS, said: "Decisions to migrate are complex and a person's decision to move to or from the UK will always be influenced by a range of factors, including work, study and family reasons.
"Different patterns for EU and non-EU migration have emerged since mid-2016, when the EU referendum vote took place."
Thousands of consumers seeking compensation for alleged mistreatment by bust British payday lender Wonga have been “left to fend for themselves”, a group of MPs said last Wednesday
- Nicky Morgan MP, chair of the Treasury Select Committee (TSC), has written to financial regulators and Wonga’s administrator Grant Thornton to say complaints from former customers of the lender are going unanswered.
- Wonga was Britain’s largest provider of short-term, high-interest loans before going into administration last August. At the time of Wonga’s failure some 10,500 consumers had complaints open about the firm.
- “It cannot be right that over 10,000 people who may have been mis-sold loans are just cast aside, especially as many will be vulnerable consumers,” Morgan said.
- The Financial Conduct Authority said in correspondence with the TSC that these consumers were not eligible for compensation under its various complaint schemes now that Wonga had collapsed.
- Grant Thornton said in a statement it was aware of the Treasury Committee’s letter and would formally respond before the March 7th deadline. The accountancy firm said it was developing a methodology for adjudicating claims “in a fair and reasonable way in the circumstances of the administration”.
- A spokesman for Grant Thornton added: “Our aim is to treat claims fairly and efficiently, and to maximise the assets we receive in order to best compensate creditors, including claimants.”
BBC and ITV are set to launch a rival streaming service to Netflix - The BBC are in the “concluding phase of talks” with ITV to create a rival to Netflix’s streaming service.
- BBC director general Tony Hall said the aim was to launch “BritBox” in the UK in the second half of 2019. The price was not announced but Lord Hall said it would be “competitive”.
- ITV’s chief executive Dame Carolyn McCall said it would be home for the “best of British creativity”. There are reports it could cost £5 a month for subscribers.
- The new venture is not intended to replace the BBC’s iPlayer or the ITV Hub – the on-demand services where programmes are available for a restricted period of time. It is expected to have box sets from the BBC and ITV archives.
- There will also be some programmes commissioned only for BritBox. Shows would appear on the relevant channels, then on the on-demand services before going on to BritBox.
- Dame Carolyn said that existing licensing agreements with Netflix will be honoured. For instance, last year, Netflix acquired the rights to the BBC show Bodyguard - from ITV Studios which owns the production company which made the drama. ITV also said that talks with Channel 4 and Channel 5 to join the venture were ongoing.
- Regulator Ofcom said it was looking forward to discussing the plan with ITV and the BBC:
“We want to see broadcasters collaborating to keep pace with global players, by offering quality UK content that’s available to viewers whenever and however they want to watch it.”
What's Coming Up
- On Tuesday the 5th of March, there will a Scottish Government Debate on the current state of EU Withdrawal Negotiations in light of recent political developments in Westminster
- On Wednesday the 6h of March, the Cabinet Secretary for Finance, Economy & Fair Work Derek Mackay will answer Portfolio Questions from MSPs in the main Holyrood chamber, followed by the Cabinet Secretary for Environment, Climate Change and Land Reform Roseanna Cunningham. They will be asked questions on the following issues, amongst others:
Finance, Economy & Fair Work
- To ask the Scottish Government which parts of the economy and areas of employment are most at risk from a no deal Brexit.
- To ask the Scottish Government what discussions it has had with businesses regarding the potential economic impact of Brexit.
Environment, Climate Change and Land Reform
- To ask the Scottish Government whether it will provide an update on its plans to introduce a charge on disposable drinks cups.
- To ask the Scottish Government what discussions the environment secretary has had with the transport secretary regarding the environmental implications of the proposed Personal Rapid Transit system for Glasgow Airport.
- On Thursday the 7th of February, MSPs will have a short segment of general questions followed by First Minister Questions.
- Later that day, Portfolio questions will be asked of the Cabinet Secretary for the Rural Economy by MSPs which include some of the following questions, amongst others:
- To ask the Scottish Government what preparations it is making for business continuity with wholesale food providers in the event of a no deal Brexit.
- To ask the Scottish Government what progress it has made in developing a rural economy action plan.
- On Monday the 4th of March, the Secretary of State for Housing, Communities and Local Government James Brokenshire will answer oral questions from MPs in the House of Commons. He will be asked, amongst other things, about the following issues:
- What assessment he has made of the financial sustainability of local authorities.
- What steps his Department is taking to deliver planning reform for high streets.
- What discussions he has had with the Home Secretary on financial support for local authorities acting as asylum dispersal areas.
- On Tuesday the 5th of March, the Chancellor Philip Hammond will take to the floor answering questions from MP which will include the following:
- What discussions he has had with the Secretary of State for Business, Energy and Industrial Strategy on potential job losses as a result of the UK leaving the EU without a deal.
- What steps his Department has taken to mitigate the potential effect on the economic sustainability of the manufacturing sector of the UK leaving the EU without a deal.
- If the Minister in his Department with responsibility for the UK Shared Prosperity Fund will meet the All-Party Parliamentary Group for Post-Brexit Funding for Nations, Regions and Local Areas to discuss progress on developing plans for that Fund.
Also on Tuesday, the Brexit Secretary Stephen Barclay will give un update to the Exiting the European Union Committee on current progress of the UK’s negotiations on EU withdrawal at 16:00pm
- The Scottish Chambers of Commerce has urged the Scottish Government to use their powers to support key transport routes and jobs.
- Continued growth after expansion for leading law firm Thorntons
- Tax Avoidance Schemes and Liquidation
- Personal and Corporate Insolvency Law and the differences in regimes as between Scotland and England & Wales
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