Chamber and committees

Good morning and happy Europe day. I should say that my view has always been that we should have stayed in the EU, as was true for the majority of people in Scotland. However, we are out now and the inquiry has heard from a number of witnesses about businesses in Scotland that have gone bust, ones which have stopped exporting altogether and ones which have been taken over—one example is a company that was taken over by a German company so that it could continue to export to the EU with slightly less friction. We have also heard that it is harder now for some companies in Scotland to export to the EU than it is for them to export to Turkey or Russia. Last week, we heard from a witness from Northern Ireland that the UK is rapidly becoming the most expensive place in the world in which to do business.

The work that you do in trying to boost exports brings benefits but, given all those points, it would be good to get an appreciation of what you think you can achieve. How much is structural and is not going to change? We have not seen a lot of the frictions bite yet, but we will do shortly. How much is structural and not susceptible to encouraging businesses to export more and will always mean that there is a competitive disadvantage? Conversely, how much of it is susceptible to doing things differently and improving what we do so that we can overcome those structural issues? I do not know whether that makes sense. I am just trying to get an idea of the extent of what is possible.

My earlier question was about what was structural and baked in, and what was susceptible to being changed. To my mind, we have to be a bit realistic about the labour market because it has never been tighter. Unemployment in Scotland is very low—below what economists call full employment, so it is even more full employment, if you like. It is also very low in the UK. We have to be frank about the fact that we do not have a big swathe of unfocused labour that can be deployed to those areas. The way to resolve it is to alleviate the pressures that have been brought in by Brexit, and allow more people to come in. Various organisations have made approaches to the UK Government to do that. In fact, we had that particular approach in Scotland before, under the fresh talent initiative, back in the 2000s, when there was a dispensation in Scotland in order to attract new talent.

Is there any sign of change? A report came out in the UK this week saying that, particularly in the care sector, and maybe in the agricultural sector, there are now chronic shortages. Are you aware of any sign of the UK Government changing its mind, for example, in relation to the wage barrier of £38,000 a year? Are you involved in lobbying for that?

I am conscious that, in the evidence that you have given us this morning, you have been consistent with each other and with what the committee has heard in this inquiry previously, except in one regard, which is the strength of feeling. In the past, we have heard from individual businesses that are said to have stopped exporting altogether to the EU. Some have gone bust—I am thinking particularly of a small business in Kintyre—and some have looked to be taken over. In one case, a business looked to be taken over by a German company, because that would make it easier to export to the EU. Businesses are pretty strident and negative about their experience. One company told us that it now finds it easier to export to Turkey, Russia and China than to the EU. That is an immediate drop-off. I think that the loss to the UK is meant to be at least £140 billion.

On the last point that Mr Williams raised about investment in the UK, we now hear that the City of London stock exchange has reduced in size significantly and that that is an on-going process.

I know that some of your organisations are the Scottish side of UK-wide organisations. I want to find out whether you have found a different experience in Scotland, or whether what you have just talked about is common throughout the UK. In Scotland, for many years, we have had a positive balance of payments—if there was such a thing—as we in Scotland export substantially more than the rest of the UK does, compared to what we import. I would be interested if you could say, from the point of view of your organisations, whether the things that we are experiencing, such as the mobility of labour, are common across the UK. Is that more pronounced in Scotland?

I will go to Mr Bain. Welcome, Mr Bain. I think that the last time we met was on “Newsnight” some years ago. It is nice to see you again. Would you like to come in on those points?

I thank the witnesses. We heard earlier in the inquiry—

Earlier in the committee’s inquiry, we heard, mainly from Scottish stakeholders, that the Windsor agreement has been pretty disastrous. I think that, across the UK, £140 billion has been lost to the economy. We have heard of Scottish companies that have gone bust—which, from what you have said, has not happened in Northern Ireland. We have heard of Scottish companies that have stopped exporting to the EU completely, because it is too prohibitive. We have seen job losses and so on. We have also heard of Scottish companies that have been taken over—in one example, by a German company—because that makes it easier to trade with the EU. It seems that the experience in Scotland has been pretty disastrous given the additional costs of doing business, the friction, the regulations and so on. In fact, we heard that, for some businesses, it is more difficult to deal with the EU than to deal with Russia.

Your experience seems to be different, which is, no doubt, partly due to the dual market access that Northern Ireland has, although you have also said that the UK is becoming one of the most expensive places in the world to do business. Do you think that, where the Windsor agreement is working, it is working to the advantage of Northern Ireland and thereby to the disadvantage of Scotland? Both Scotland and Northern Ireland voted to stay in the EU, but we have had very different paths since then. If that advantage exists, will you seek to protect it as the TCA evolves?

We have had quite a number of round tables, and I have found this to be the most interesting that we have had, because of the contributions.

There is a kind of false debate going on about how good or bad Brexit might be but having heard about the practical examples of additional costs, markets being closed off, firms being stopped from doing things that they were doing before or doing things in Ireland rather than Scotland, as well as the other additional costs and confusion, I think that the situation seems pretty horrendous. I am happy to be corrected, but I am assuming that all the examples that have been given demonstrate how things have changed from the base, which was pretty much seamless. Going back to the samples that were mentioned earlier, I would say that everything used to be done pretty easily; now we are talking about new costs and loss—that is, loss of control or innovative capacity in Scotland. That is really worrying.

On the question of how you actually deal with the situation, I remember going to Canada a few years back to ensure that haggis was able to go on sale there. That was not possible in the US, as the Americans would not accept it. I remember the US authorities in New Jersey and New York saying that they were fed up to the back teeth of people trying to export to the US who did not have regard to their certification and standards. People kept on saying that they had certification, perhaps from the EU or Italy for cheese or whatever. The US authorities said, “We’re not interested. We just want you to comply with what we need.”

This might be a gross simplification of what is required but, in that context, would it be helpful for industry to have somebody—whether from the Scottish Government, the UK Government or both together—who was able to explain to a firm what it could export, and to which countries, if it did all the things listed on a certain page? I know that requirements are dynamic and that they can change over time—indeed, even while your products are sitting on the quayside—but I wonder whether it would be useful to have that kind of simplified list of all the things that firms have to do to satisfy the requirements.

By the way, I do not share the optimism that the EU being subject to some of the same constraints will make it change its attitude. The EU made it plain throughout the debate that we would not feel as comfortable after Brexit as we did before—although I hope that we can. Is that sort of simplified support from Government worth having, or would that be too complex? Might the industry be required to do that itself, because only those in the industry know everything that they have to do?

Thanks very much for your contributions so far.

I was interested to hear what Joël Reland had to say about the administrative bandwidth constraints on political ambitions. However, I think that it is also true, certainly in my experience, that politics drives those things. On the idea that the EU is a rules-based institution that slavishly follows the rules—we were discussing animal feeds and so on—Brexit happened and blew all that away.

On the accession of an independent Scotland, it will be politics that drives it, not any rules. Ukraine has climbed up the league table very quickly to accession status, which is a response to the politics rather than to anything else. Could you say a bit more about that?

Neil Bibby quite rightly asked about a Trump presidency. It would be interesting to know whether a future UK Government would stick with a Trump presidency that was encouraging Russia to attack a European state. Would the UK Government be driven to work more closely with Europe?

I will mention two other things. First, in relation to the European Parliament elections, can you see anything on the political horizon that might make it more difficult to effect changes to the TCA—for example, a particular party in any country having a very strong view on something that might impact on the TCA? I know that that will require a little bit of crystal-ball gazing.

The second matter relates to defence and security. Again, are there things in that respect that might happen that would have a substantial impact? It is obviously difficult to say how things in the middle east or further developments in Ukraine will play out in relation to the EU’s response. Can you see on the horizon any defence and security developments that might impact on the ability to change the terms of the TCA in relation to the interests of one or more of the 27 member states? That is for Joël Reland, first.

Mr Barker said that you, rather than Government or anyone else, would be aware of points of divergence. Is there any point of divergence on which you have made representations to the Scottish Government and that the Government would be able to address?

I appreciate the huge breadth of the issue and that, even if you do nothing at all, you will diverge, because of the reasons already mentioned. Is there any obvious point of divergence that has caused you concern, that you have made representations on and that might be within the gift of the Scottish Government to address?

I apologise for being late, convener, and I apologise to the panel as well. Even from the part of the meeting that I have listened to, the situation seems disastrous, to be honest. Continual issues of guidance and regulation make for a very hard environment to work in.

However, to stick with EU departure and the TCA, I have two points. First, you mentioned that the lack of any kind of formal monitoring of divergence by the UK Government was crucial. The committee tries to carry out such monitoring, and the Scottish Government is committed to doing that, too. Are those commitments irrelevant? Does the UK have to do that monitoring, because of the relationship with the EU?

Secondly, on the point that you made about uncertainty, I think that most people never saw Brexit coming—not far in advance, anyway—and I predict that most people will not see what will happen next. Things may change very quickly. For example, would going back into the single market change things? It would be disruptive, of course, as a further change, but would it eliminate some of the current problems, or is full EU membership required in order to effect such a change?

Those are my two questions. The first is, is there value to your organisations in committee and Scottish Government monitoring of divergence and the attempt on the part of the Scottish Government to limit divergence, or does it have to be the UK that monitors that? The second is, what might the effect be of going into the single market?

I do not know as much about this as I would like to know, but, from the opening comments, it seems that the big question is about where we go from here. If there is no pre-made plan based on ideology or whatever else for where we should go, surely we should take a pragmatic approach by thinking about how things that are not currently working could work better. Irene Oldfather made the point that the situation is likely to change over the course of the year, but surely it is about trying to deal with the pressure points and friction points. That is my suggestion.