Brexit trade deal is vital to Scotland's Covid recovery – CBI Scotland

A Brexit trade deal with the EU is vital as we make the long, hard journey to economic recovery after the coronavirus pandemic, writes Tracy Black of CBI Scotland.

Boris Johnson must realise the importance to the economy of getting a trade deal with the EU (Picture: UK Parliament/Jessica Taylor/PA Wire)

Anyone following recent progress on UK-EU talks could be forgiven for watching through their fingers. Brexit has returned to the front pages in dramatic fashion. But for all the sound and fury, the negotiations continue. Both sides say a deal is their preferred outcome. Businesses across Scotland strongly share the same desire. Rarely a day passes when I don’t hear how central a deal is to our post-pandemic economic recovery.

Recent Scottish GDP figures revealed a 19.4 per cent fall in real terms for the second quarter, a timely yet stark reminder that the journey to economic recovery remains in the very early stages, even as pubs, shops and other businesses spring back into action across the country. If our economic recovery was an ascent of Ben Nevis, the visitor centre might be fading from view, but the climb ahead is long, steep and with the hardest yards yet to come.

Throughout the crisis, businesses have shown an extraordinary level of resilience, but it is inescapable that the Covid-19 pandemic has had a significant impact on their ability to cope. If the Brexit transition period ends without a trade deal – creating a messy end to an already turbulent year – that would significantly hold back progress and impede businesses’ ability to protect jobs and invest in the future. Presently, several headwinds buffet the UK’s route to recovery. Aside from a Covid-19 second wave, the good news is that there’s much the UK can do to help itself grab an inclusive, sustainable and effective recovery that would mean so much to people’s jobs, livelihoods and living standards.

We know companies are still struggling with their cashflow. We see it every day as companies cite cashflow as one of the biggest factors behind difficult decisions. So, what can be done to help? Across the UK, the CBI has recommended extending lending facilities like business interruption loans and deferring second quarter VAT payments to ease the burden.

The return of demand remains unevenly spread across the economy. Business therefore welcomes the introduction of the new Protect Scotland app, which will provide an additional layer of armour in our battle with the pandemic. Continued improvements to NHS Test and Protect, while seriously boosting testing capacity, are what is needed to build confidence – both among firms and the public – before a vaccine becomes available.

Nonetheless, confidence won’t help firms in areas of the economy hit hardest by the pandemic, which is why the CBI has set out plans for a successor – not replacement – to the hugely successful furlough scheme. There’s no doubt that the Job Retention Scheme saved many thousands of jobs and businesses across Scotland, but, as we face new Covid-19 challenges, it’s increasingly clear that a like-for-like replacement isn’t going to come into operation.

Any proposed new scheme should be clear that it will not support jobs that were never going to return, but instead should adopt a more targeted approach for companies most in need. The idea of a successor to furlough has since been backed by the Treasury Select Committee, the Federation of Small Businesses and the Resolution Foundation think tank among others.

Which brings me, finally, to the elephant in the room: Brexit. Let us remind ourselves what can be achieved. A negotiated deal between the UK and EU brings with it a slew of immediate benefits. For starters, it will protect jobs under pressure from the pandemic via duty and quota free trade, closer customs cooperation and easing the implementation of the Northern Ireland Protocol. We must remember the Protocol was the compromise needed to avoid a hard border in Ireland. For Northern Ireland’s businesses and communities, it must be implemented in an effective and sustainable way. And for that, we need a deal.

Next, the UK is an 80 per cent services economy – with Scotland hugely benefitting from financial and professional services. So the UK must seek an ambitious agreement, acting as a platform on which the UK’s world-beating services industry can continue to trade with its biggest market and stay competitive. Sensible outcomes on data and financial services are an absolute must.

A deal would also mean Scotland’s exporters could focus on research and development – not red tape. We have great, world-leading brands, but they don’t want to rest on their laurels. They want to innovate, diversify and grow. A deal means greater choice for consumers, too, while helping guard against rising grocery prices during a recession.

A deal will allow business to concentrate on growing our economy through the creation of green jobs and vitally important opportunities for young people, who we know are disproportionately impacted during an economic downturn. And ultimately, an amicable relationship with our biggest trading partner can provide a platform upon which future trade agreements can be built. We’ve already seen what can be achieved with Japan.

In short, the size of the prize is real. Ending years of division and delay by securing an agreement with the EU will help our economy during the biggest challenge of our generation. Businesses have been through the wringer time and again with ticking clocks and cliff edges.

What the majority of firms now want is a good deal and to work closely with both the UK and Scottish governments to help forge a path back to prosperity, creating space to focus on other totemic challenges, from creating jobs that help flatten the unemployment curve to ensuring the benefits of growth are shared more evenly across the country and society.

Tracy Black is the CBI Scotland director

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