1 Introduction
1. On 1st May 2004 the fifth enlargement of the European
Union saw the accession of eight Central and Eastern European
states: the Czech Republic, Estonia, Hungary, Latvia, Lithuania,
Poland, Slovakia and Slovenia (the A8). Cyprus and Malta joined
at the same time.[1] The
fifth enlargement was the largest in the EU's history, adding
ten member states and 75 million people. On 1st January 2007 the
accession of Bulgaria and Romania (the A2) added a further 30
million people.
2. In the 1997-2001 Parliament our predecessors conducted
a major inquiry into trade and investment relations with the Czech
Republic, Hungary and Poland and a subsequent inquiry into trade
and investment relations with the Baltic States.[2]
This Report is intended partly to act as a follow-up to those
Reports.
3. The previous Committee's Report into Industrial
and Trade Relations with Central Europe identified a number
of sectors—including retail banking, insurance and automotive—where
British business had been reluctant to take up investment opportunities.
It also identified sectors, such as energy, where British companies
had been more enthusiastic. The Report expressed the view that
privatisation programmes still offered good opportunities at the
time of writing but that it was "getting rather late in the
day" for British companies to take full advantage.[3]
The Committee noted that there was "little doubt" that
membership of the European Union would bring the three countries
benefits, but "The balance of costs and benefits for existing
member states, including the UK, is less obvious."[4]
Overall the Committee expressed disappointment that "the
level of UK investment in central Europe should be so relatively
low."[5]
4. The Committee's report into Industrial and
Trade Relations with the Baltic States came to largely similar
conclusions. The Committee expressed disappointment at "the
relatively low proportion of UK companies investing in the Baltic
States" and in particular drew attention to the absence of
UK banks and financial services companies in the region.[6]
The report identified a strong desire among the Baltic States
to invest in e-commerce and information and communications technology
(ICT) more generally.[7]
Opportunities arising from the restructuring of energy markets
and development of tourism infrastructure were particularly stressed.[8]
5. This Report examines the impact resulting from
the accession of the A8/A2 countries on UK business and the potential
of those countries as business partners, export markets and possible
competitors. It considers the extent to which UK business has
taken advantage of the opportunities made available by the opening
up of Central and Eastern Europe following the collapse of the
Soviet Union, the implications for UK business of migration from
the A8/A2 and the effects of relocation of business functions
from Western to Eastern Europe.
6. This inquiry is focused on the effect of the accession
of the A8 and A2 countries on UK business and the economy. It
does not, therefore, address the impact on the A8/A2 countries
themselves except insofar as this affects UK companies seeking
to do business with those countries. Nevertheless, the relative
size of the A8/A2 means that in all aspects of the relationship
between the 'old' and 'new' EU the impacts on the 'new' EU are
considerably greater than the effects on the 'old'—including
the UK. For example, official statistics suggest that migrants
from all A8 countries account for 1.24% of the UK workforce, whereas
we were told in Lithuania that up to 15% of the country's entire
pre-accession population is currently living in the UK and Republic
of Ireland.
7. During this inquiry we took oral evidence from
EEF, the Manufacturers' Organisation; Intellect, the trade association
for the software and IT industries; Department of Trade and Industry,
Department for Work and Pensions and UK Trade and Investment officials;
British Chambers of Commerce; and Katinka Barysch, Chief Economist
of the Centre for European Reform. We also undertook visits to
Lithuania, Hungary and the Slovak Republic, in the course of which
we met a wide range of UK and local business people, government
officials, ministers and embassy staff. We also held informal
meetings with the staff of these countries' embassies. We received
21 written memoranda and supplementary memoranda from government
departments, individuals, businesses, employers' representatives
and trade organisations. We express our gratitude to all those
who helped arrange our visits, who gave their time to meet us
or who submitted evidence to us.
1 Although Cyprus and Malta are not covered by this
inquiry, where data refers to the ten countries which joined in
2004 they are referred to as the EU10. Likewise, EU15 refers to
the fifteen countries which were member states prior to 2004.
Back
2
Trade and Industry Committee, Twelfth Report of Session 1997-1998,
Industrial and Trade Relations with Central Europe, HC893;
Twelfth Report of Session 1999-2000, Industrial and Trade Relations
with the Baltic States, HC835 Back
3
Industrial and Trade Relations with Central Europe, para.
37 Back
4
Industrial and Trade Relations with Central Europe, para.
17 Back
5
Industrial and Trade Relations with Central Europe, para.
33 Back
6
Industrial and Trade Relations with the Baltic States, para.
76 Back
7
Industrial and Trade Relations with the Baltic States, para.
74 Back
8
Industrial and Trade Relations with the Baltic States, paras.
52 and 75 Back
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