 Okay, good afternoon everybody. Thanks for joining us today. Thank you especially to those who made it into the premises but also thank you for those who are joining us online. It's my great pleasure to chair this event, this hybrid event at the IIEA and we're delighted to welcome David Hennig today. David is the director of UK Trade Policy Project at the European Center for International Political Economy and we're really pleased that he's made time for us today in his very busy schedule. David's going to talk for about 20 minutes and there's going to be lots of time for questions at the end. If there were issues to be clarified we can probably take them during the talk but we leave the questions to the end. People online can share their questions with their questions and answers function on the Zoom and I'm going to be able to read those out when we get to that. One reminder is that this event is on the record so that it should be born in mind. Some events that we've had at the IIEA previously might have been off the record on Chatham House Rules. This is on the record. For anyone who's on Twitter there's a Twitter handle IIEA which you might want to use if you want to share some of your impressions of today's talk online. I'm going to just say a few words about David before I hand over to him. David, as I said, is the director of the UK Trade Policy Project at the Think Tank European Center for International Political Economy and I've actually followed David a little bit on Twitter. He doesn't know that and he's been giving very, very interesting analysis both on Brexit, UK's trade policy and also on the UK economy and I think today's talk will look at all three. David has served as expert advisor to the UK Trade and Business Commission and the House of Lords so he's really well placed to give us some very interesting insights and prior to joining the ECI PE he was actually working in the UK government so again that puts him into an extremely good position to give us some very valuable insights. With that I'm going to hand over to David, 20 minutes or so and then we'll do questions and answers. David. Thank you, I guess. Thank you Barry for the invite to come here and talk. We were actually talking a few months ago I think it was during the very short Prime Ministerial reign of Liz Truss. We were talking about doing an event on the UK economy but I think that things just moved a bit too fast then. By the time we thought well when should we do this? Liz Truss had ceased to be Prime Minister and that's kind of in the story of the UK economy for the last few years is that whenever we were worried that we were doing badly we couldn't need to worry because there's some worse news was coming on the way and when I compare it to the Irish economy judging by what I see from over the water and what I've seen wandering around this morning you know it is quite the contrast or I will say that it does appear that finally the you found a way to keep the Brits out of Ireland by making it too expensive for us to come here. So let me talk about the UK economy, let me talk about whatever happened to global Britain, let me talk about a little bit about Brexit, let me talk about what might come next because we are quite likely to have a change of government so what does the new government think about the economy? So let me try and package that up there's lots of different directions that I'm happy to answer questions on from details of the Windsor framework which I have to look at for my work to broader questions of globalization and what's happening next and so I kind of cover all bases there therefore I don't quite have time to have the kind of detailed study so I haven't actually carried out the kind of detailed modelling studies that many others have done there so this is necessarily a sort of big picture overview and what I would say to start with is this is probably the gloomiest moment for the UK economy since the late 1970s inflation higher than G7 average growth forecast generally lower trade performance disappointing this is not the Brexit brochure um you know it's not it's not the end of the UK I mean and we're not writing off the UK as a global uh player we've still got the south power we're still a services superpower we're still significant in defence diplomatic networks um we still have many global global companies but we're clearly not in a great place economically for for future growth and there is not there's not a good a great degree of positive positivity around so yeah let's let's look at Brexit and the change in globalization and what that's going to what's that that's going to mean the UK talked about being a global leader as a result of Brexit clearly that is dissipating that's just disappearing from from from from view it's now very much around damaged limitation but yeah we're not rejoining we can't relitigate 2016 so where does the UK realistically go from here and we have to start with brexit there is no question that the last seven years of brexit politically has shaken UK confidence profoundly it's almost become an unmentionable in UK politics neither the conservative party but not even labour can really speak openly about the effects of brexit you could not get a political a leading politician from either main party to talk about what's been happening on the on the economy we get now make brexit work as kind of profound um this next part the most obvious part you will not get many politicians to say that the greater the trade barriers the lower the trade especially with your nearest neighbour i mean it seems so obvious and yet um the last few years have shaken any discussion of it even more so when most trade is now carried out in supply chains and that's where the service is all goods trade it's all part of larger transactions and when many of those supply chains are regional wealth and global you are putting up barriers to those supply chains operating you are particularly putting them up on manufacturing where uh you're not only threatening to have different regulations on everything you have potential tariffs you have a lot more border paperwork it's easy relatively easier if you're a large company if you are a small company that was supplying an industrial product to a german end manufacturer you've just suddenly increased your costs compared to competitors you're also finding it a lot more difficult now to find any new customers that is is very much what what's happening there um all of our neighbours now every single one if you've got a company in that in in 30 or so countries they will face less barriers to trade than a uk company and that's quite a a shocking thing to to say so you're disadvantaged by being based in the uk which is why a lot of uk companies are setting up facilities elsewhere they say they may set them up in in northern island many are setting them up in the netherlands germany wherever it is um that doesn't cover all uk trade because there is a large part of uk trade that involves um that is services and that doesn't the barriers don't really matter so much university students we're now sold some estimates higher education is now is one of the uk's two or three largest exports financial services it doesn't matter so much the english premier league however defined that's a huge revenue earner in various ways not affected it is the manufacturing there is a relative shift going on in the uk from manufacturing into into services um and none of this feels in the remotest part sustainable how can you have the uk kind of in a bubble on its own when all of our neighbours have but have more integration with with each other um you now start to see the barriers if somebody wants to sell a product from the from the uk or from great britain really more specifically to europe they will come across barriers we're coming across barriers when we travel to to to europe young people are starting to to find the problem of not being able to to do the jobs and the demand for mobility for the youth mobility is growing and is again not really being picked up within uk politics um and the uk's never really been in this situation of being excluded from from europe perhaps in the nineteen in the 1960s but the world's economy and the way economies worked was much was very different then um and that means that really all of this the politics and the economics ultimately are going to point towards the uk trying to find ways to to reduce those barriers um the overall hit various discussions various methodologies around as to how you would calculate this but we are i think common consent is we are somewhere in the region of between four and six percent of gdp as an economic hit and these that number is off the scale there is no policy intervention that in in today's economy that anybody can think of that delivers a four to six percent here or four to six percent uh uh growth in in in gdp an average trade deal might on forecast deliver you 0.1 percent of gdp um labor mobility which is probably the the thing that delivers you the most maybe has uh contributed perhaps one percent to uh to uk gdp because we have kept relatively open open borders but um it is a huge hit now it was supposed to be offset by global britain i think you may have come across that phrase and i think a lot of people were finding it quite a humorous phrase with a lot of people from outside the uk quite a lot inside the uk even before uh recent months when it quite clearly wasn't happening so the idea is we would offset losses from EU trade uh we'd have new trade deals would reduce tariffs we'd have more nimble regulation and what's interesting in the last few months is how that's not not a lot of that is not being heard so much any anymore because it's not working um yes we've got trade deals with australia and new zealom but they're not they're not going to deliver much and they're already running into problems over unhappy farmers trade deals tend to lead to unhappy farmers because the remaining tariffs in place that they reduce are on agricultural produce um we've joined the comprehensive and progressive agreement for the trans-specific partnership the cptp 11 countries but we already had trade deals with uh nine of them malaysia is the the major new country there so that will deliver a little bit um but there's a problem there as well so that's a mega regional with um which is designed to encourage regional value chains to emerge between asia pacific countries the uk is not going to be part of those value chains by and large those supply chains because we're too far away so we're more likely to be a customer so if you like it may give us the benefit of having an alternate source of goods from china but it is not going to do much for our manufacturing so if anything it's going to continue the trend away from manufacturing towards services which was not what brexit was supposed to deliver um goods exports anyway are going down from the from the uk service exports are performing okay um we've lost half our car production since 2016 now a lot of european countries have lost car production since 2016 but the difference was that in most cases they've started there's been a little bit of a bounce back in the last couple of years but not in the uk we're down from 1.6 million to just under 800 000 and no obvious way that's going to increase we're kind of behind on electric vehicles we don't we only have one geiger factory sport our nissan plant um so our car industry is looking is looking tricky honda closed in 2021 that was a major source of exports to the us of goods because they export their cars there um so and we don't have a large goods exporter to the to the to the us a car exporter uh once once they once they've gone and the us itself is a problem of course because the us is turning to protectionism at the very moment when the uk would like to export more there so the whole inflation reduction act biden but it started with trump of course trump was already turning away from trade and saying free trade agreements are bad for the us biden has made it even more obvious that that's what he believes the uk doesn't have that opportunity so as part of the conservative right there were backing brexit they felt that the us was the the sort of the replacement for the eu well that's not only not happened that looks in no prospect of ha of happening um meanwhile you've got the eu basically trying to regulate the net zero uh transition for the world through carbon border adjustment mechanisms uh various grip deforestation various green um uh regulations which uk companies are going to have to follow so the idea of being more nimble doesn't really work we can have choose to not have regulations on for example deforestation but our companies are going to have to follow the eu ones anyway um and there's not much of an agenda beyond uh what we've already had there is there are ongoing trade talks with india there it's not clear what's going on but it's not likely to lead to a particularly ambitious trade deal as far as we can tell there's a few renegotiations with the likes of switzerland south korea canada again not clear that will lead to a lot more than we already that we already have and so global britain is now surrounded by a kind of a gloom almost oh you know that that was an idea but it's all gone wrong even among the brexit supporters you now get this idea brexit was never tried properly we might pick that up again later um what happens next there's a labor probably a labor government um probably a general election in october next next year um trade and international economics are barely labor issues labor is normally going to focus more on social policy public uh public services um but to do that they're going to need to find some growth from somewhere um so there's a certain inevitability and labor is more instinctively pro eu they don't have a large proportion of uh back bench and member opinion that the eu is somehow wrong and bad so labor will in some way want to rebuild ties the eu and try to rebuild supply chains but without talking about it as i mentioned earlier um so they'll try i think to deepen the trade incorporation agreement to uh make trade and food products for example easier with a veterinary agreement some mutual recognition of uh manufactured products conformity assessment um possibly something about professional qualifications various easements of barriers but the barriers will still be there they will not change the fundamentals that the UK will companies in the UK will face higher barriers than companies outside the UK in all of our neighbours um they may be a little bit of a benefit from labour just from stability just from not being a conservative party that seems intrinsically anti-business anti anti-eu that may help a little bit in terms of in terms of investment um but there is a limit how much this is likely to to deliver we are back to trade agreements that might deliver 0.1 or 0.2 of GDP as against the 4 loss and the loss was not just from the trade barriers it was also from the kind of uncertainty and poor handling um what's they were going to do about regulation i think it will just align now and say we're going to align with EU regulations where possible which will at least be some stability there but again it doesn't feel like a stable outcome so what i'm expecting to happen is that by the late 2020s we will be back in the disc we finally will be able to have the discussion well what does the UK now do about the EU in the meantime of which i suspect the economy will have changed a little bit it will be more even more services dominated than it was before because that is where um it's easier to do business internationally than in manufacturing where there are obvious barriers um so this government has slowed up already i mean just some concluding thoughts this government has already slowed up on their on their agenda and what labour is planning to do doesn't quite look adequate to a UK economy that is is in this state of state of bloom there's nothing that seems to suggest that we're going to turn this round and suddenly become a star performer you do have some idea that labour will do something around the green economy but so everybody's doing something about the green economy um we've got serious problems with manufacturing there is a possibility that that transformation that is already going on with the UK economy from manufacturing services actually maybe we've already taken most of the hit the economic hit and that actually a government that focused on UK strengths and but this would be politically difficult and basically less on manufacturing that the economy might be able to strengthen from that but that is going to be probably politically impossible um so yeah whereas for example in the UK expanding universities would seem an obvious policy which had economic benefit will labour be able to actually to do that um we'll certainly need greater better infrastructure regionally i think that we will carry on on the road back towards closer relations with the EU but i don't think i don't know there'll be a conversation about rejoining the EU in the next five years but i think we'll start to they'll start to be more conversations about the single market and the customs union um and for the moment um we are back to the UK gloom that was around in the 1970s before Margaret Thatcher became prime minister of kind of uh what was called declineism the UK in in permanent decline um and it's not yet clear that we've got the answers to coming out of that decline and brexit and the politics of the last seven years and the kind of almost a collective nervous breakdown that we've had is going to make it awfully difficult in the next few years to find our path out but that is the challenge the UK has i'll stop there again