Sir Keir Starmer’s government has articulated an ambitious trade strategy to boost the UK economy and shake off the remaining cobwebs of Brexit when it comes to improving movement of goods. One of the trade strategies that Labour included in its manifesto is negotiating trade agreements with “key international players” and “resetting the UK’s relationship with the EU.” Before the elections, the Labour Party said it would drastically overhaul the Conservative Party’s post-Brexit trade policies by “focusing on quality over quantity” in trade deals and ensuring that trade agreements align with national priorities and economic objectives.
In summary, Labour’s 2024 manifesto included the following promises on trade and the movement of goods:
- Improved trade and investment relations with the EU, to be achieved by tearing down unnecessary barriers to trade
- Targeted trade agreements aligned with the UK’s industrial strategy and economic strengths
- Publication of a trade strategy and use of every lever available to get UK business the access it needs to international markets
- Leading international discussions to modernize trade rules and agreements
- Seeking a new strategic partnership with India, including a free trade agreement
- Deepening UK cooperation with partners across the Gulf
- High-level commitment to investment in “green industries of the future,” such as ports
Powerful words, clearly aimed at fostering resilience and diversity, but in many cases lacking clarity and an implementation strategy.
For example, the UK automotive sector depends on imports for key battery components and materials, which Labour describes as an “overreliance.” However, the manifesto lacks a viable alternative other than establishing a Supply Chains Taskforce to build on the country’s capacity in this sector. There has even been a mention of lithium mining in Cornwall (as well as strengthening relationships with other international partners). Although it is no longer novel to look for ways to return to a more circular economy by relying on a country’s own raw materials and reducing dependence on imports, the key consideration which has been widely discussed in recent months in the context of alternative fuel is: Do we have enough raw materials, and are the alternatives sufficient to support the demand? As with general discussions on alternative fuel and energy sources, the answer, for now, seems to be a series of “don’t knows.”
The Supply Chain Working Group (SCWG) has been established to build consensus on automotive supply chain companies, focusing on, among other things, improving long-term competitiveness in the supply chain, satisfying supply chain demand and improving access to finance for the supply chain. This is a promising start, and we will monitor the progress SCWG makes in the coming months.
The plan for the lithium mine is also seeing the light – a demonstration plant is to be set up in St. Austell by Cornish Lithium after a £15 million investment into the site. The mining company aims to produce at least 10,000 tons of domestic lithium a year by 2027.
Before coming into power, the Labour Party criticized the Conservative Party repeatedly for the industrial decline in historically key industries, including ports. The manifesto contains a general pledge to establish a National Wealth Fund to support green industries, including the upgrading of ports, with the overall aim of encouraging local economic growth, boosting investment in local ports, unlocking internal barriers to supply chains and, at the same time, helping the UK achieve its targets for renewable energy. The plan is also to create a Green Prosperity Plan, to be funded by taxing oil and gas companies. We have all seen and felt the fallout from the latest budget and its taxation policies and, with no evidence of a contingency plan, these laudable endeavors could well run into unaffordability issues, meaning even higher taxes and more government borrowing – as ever, unpopular with voters.
The National Wealth Fund was indeed established, on October 14, 2024, with plans to use over £70 billion in private investment. The fund currently has roughly £27.8 billion to invest in growth across the UK.
The government is also aligning the UK Infrastructure Bank and the British Business Bank to support a new National Wealth Fund’s focus on green energy and future industries. However, the wider prosperity plan was not mentioned in the autumn budget.
Trade agreements and negotiations
What can our exporters and importers expect from this government? The UK is currently party to over 70 trade agreements. If all goes to plan, this number should rise under the Labour government, as it is actively pursuing new agreements with several territories to enhance market access for British businesses, including the Persian Gulf, India, Israel, South Korea, Switzerland and Turkey. Indeed, the manifesto’s statement is very far reaching in this regard, promising to “prevent unnecessary border checks and help tackle the cost of food; … and secure a mutual recognition agreement for professional qualifications to help open markets for UK service exporters. We will improve guidance and remove barriers to exporting for small businesses.”
The emphasis on small businesses is a welcome nod to their importance both in the wider economy and in solving local supply chain issues. The Labour Party’s pledge to help smaller businesses in exporting includes improving support services, improving access to information and finding practical ways to remove export barriers and make trade and the supply of goods easier.
The focus on enabling trade with Europe, especially through regulatory alignment, is reassuring for the future of UK trade and supply chains. That said, the manifesto does not clearly address the ongoing trade negotiations started by the previous government. Over time, the priority may therefore shift from the EU to negotiations with India and the Gulf Cooperation Council.
Relationship with the European Union
After Brexit, which resulted in widely reported breakdowns of supply chains between the UK and EU, the Trade and Cooperation Agreement (TCA) was established to govern UK-EU trade relations. Key aspects of the TCA include:
- Rules of origin: The TCA prohibits customs duties on all goods that originate in the UK or EU, so exporters must comply with rules of origin to qualify for preferential tariffs.
- Customs checks: Additional customs checks and paperwork are required before goods can move across UK and EU state lines.
- Sanitary and phytosanitary (SPS) checks: Additional regulatory checks are required for certain products, such as food and plant products, to ensure compliance with safety and hygiene standards.
A review of the TCA is scheduled for 2026, but the Labour government said it is committed to resetting and improving the UK’s trade and investment relationship without rejoining the single market or customs union, or reinstating freedom of movement. If the government achieves this objective, the supply chain issues we have faced in the food and services sectors are expected to dissipate, and we should, once again, enjoy a more harmonized trade relationship with the EU. Potential points for negotiation at the TCA review could include:
- SPS agreement: Labour intends to negotiate a new veterinary agreement to ease the movement of food and plant products through customs by limiting documentary and physical checks.
- Mutual recognition of professional qualifications: Labour aims to pursue new regulatory arrangements for specific sectors and greater recognition of professional qualifications to facilitate the movement of services.
However, these may prove problematic, especially in terms of limiting documentary and physical checks. Although we may see a boost in trade and improved supply channels as an immediate effect, the question is: at what cost, and will the agenda change by 2026?
Conclusion
The Labour Party’s 2024 manifesto made several promises, including improved trade relations with the EU and publication of a clear trade strategy. There also appears to be a drive to reinstate elements of the circular economy and reduce dependence on imports by relying more on the UK’s own resources. This, alongside aligning trade relationships with the members of the EU, will, hopefully, put an end to the supply chain issues that have plagued us since Brexit. Although the new government has taken steps toward realizing these promises, their impact on the movement of goods is far from certain. It is still early days for Labour, and like any government, it needs time and support to develop and implement its policies. While there are many positive and innovative measures in the works to drive the economy and trade forward, the authors will be keeping a watchful eye on the actions taken (or not) to improve trade relations and resolve supply chain issues.
Additional research by Benjamin Gardner