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Written submission CBI Scotland

Written submission from CBI Scotland for the UK Internal Market Inquiry, 7 December 2021

The UK internal market operates across England, Scotland, Wales and Northern Ireland, and is the economic glue that binds our four nations. It is key to help increase prosperity, raise living standards, and opportunities for people and businesses across all parts of the UK. The internal market is critical to maintain attractiveness to foreign investment across the UK and to maximise opportunities from new trade deals as they are agreed.

The UK is a highly integrated market, and we know the importance of this for firms, particularly in Scotland, where 21% of domestic expenditure is on goods that originated in another part of the UK. 1

Businesses operate across the UK with integrated supply chains that don’t recognise internal borders. Devolved administrations have developed their own standards in a number of areas - such as the construction sector - and firms have adapted. But now the UK Internal Market Bill is in practice, it must provide certainty that products made in one part of the UK will not face additional barriers to market in another part of the UK; and with this ensure consumers in one part of the UK are not disadvantaged by limiting access to goods and services.

The codification of the UK internal market, through the Internal Market Act was one aspect of ensuring the existing UK internal market could enable firms – post-Brexit – to continue operating with the principles of mutual recognition, and non-discrimination, whilst acknowledging the rights of the devolved nations, and avoid internal trade disruption within the UK.

The development of Common Frameworks across sectors are an essential aspect to the operation of the UK internal market. The constructive collaboration between devolved administrations and the UK Government on their development shows the value to business of working together to create certainty, and clear guidance moving forwards.

Whilst the frameworks alone do not constitute the internal market, their existence can also point to ways in which the UK Government and Scottish Government can effectively develop workable policies, in agreement, for a number of sectors.

The focus of businesses in Scotland now is to help rebuild the economy in the face of complex challenges and heightened global – and domestic – competition. The priorities should be on key drivers of growth to ensure that Scotland remains a top destination for talent and investment. That means investing in vital skills and infrastructure, committing significant resources to areas – like the green economy – that offer the best chance of long-term success, and avoiding giving our nearest neighbours a ready-made advantage on tax.

With the rest of the world, and not least other parts of the UK, facing a similar set of pressing challenges, Scotland faces a race against time to reassert its competitiveness as a destination for top talent and investment.

For the internal market to continue operating effectively, firms across the UK have been clear that there are three guiding principles that must guide its full implementation:

• No new barriers to trade – the UK Internal Market Bill must work to ensure costs or barriers to doing business between different parts of theUK are not increased;
• Collaboration across the UK – strong and effective collaboration between Westminster and the devolved administrations;
• Fair, independent and trusted adjudication – ensuring aproportionate and independent approach to adjudication will be vital forbusiness confidence.

As firms become more aware of what the Internal Market Act means in practice, the CBI will continue to work closely with the CMA, as the Office of the Internal Market is fully established.