Annex 1: Note of roundtable discussion, Sunderland, 8 December 2016
With the Secretary of State having announced the previous day that the Government would publish a “plan” for Brexit, discussion began around what that plan should include and the opportunities and risks that leaving the EU presented for the region. Trades unions asked for early reassurance regarding employment rights and continued tariff-free access to Europe. They were concerned about a “Hard Brexit” and that the UK could be punished for the referendum result. It was important to get the best deal possible for the UK and if that necessitated a transitional arrangement then that was acceptable. The business representatives recognised that there would be no quick solution, but stressed that businesses needed to understand where the country was heading to create confidence for further investment in the UK. Where a company was internationally-owned, uncertainty was a particular problem.
Talent and skills were raised as a key concern given the aging workforce in the region. There needed to be a greater priority given to training and to connecting schools and the upcoming workforce with businesses in the North-East, while also maintaining access to talent from across Europe and the world. Reassurance should be given on the right to remain as a matter of urgency.
Brexit presented opportunities for the North-East region to make itself more attractive for trade and investment with the wider world. Some larger companies saw potential in exporting to a global market but were concerned about how long it would take to get there and what would fill the gap.
It was noted that the North East had received more in EU funding than it had ever received from Westminster. Those present questioned whether there would be sufficient funding for the poorest communities, like the North-East, once the UK left the EU.
A particular concern related to cases where certification of regulatory compliance was currently obtained from the UK authorities. Participants were unclear whether this certification would still be recognised in Europe after Brexit and whether they would still be eligible for certification by EU bodies. A number of participants represented digital and high-tech companies. For them, it was vital to maintain access to European technical standards and data sharing rules. The Single Market was considered a growing market for data software development. Brexit had created uncertainty for this market with questions being raised around whether companies would need to set up subsidiaries in Europe and whether this was viable for small start-ups.
For larger engineering and manufacturing companies, supply chains which cross European borders were raised as a concern. One example was given where the company’s costs were 20 per cent labour and 80 per cent materials. 90 per cent of materials came from the EU. If tariffs were added to parts crossing European borders before the final product was produced in the UK, then margins could be squeezed to such an extent that it was no longer viable to continue in the UK. Access to the Single Market and to free movement of workers were top priorities, not only for ensuring access to skills in the UK but also to enable companies to send their workers to Europe for experience.
Those present from the automotive sector raised similar concerns about the impact of leaving the Single Market on supplies which cross borders tariff-free a number of times before reaching the customer. The sector operates on extremely small margins due to the currency market and the changes in the exchange rate since the referendum had hit those who had to import components. The prospect of additional costs through tariffs left businesses with two options: do more work in the final country or move to somewhere where they can work tariff-free.
Currency devaluation was raised as further impacting the supply chain, especially for those companies which import parts. If the value of sterling were to increase again, this would result in a double tariff for some companies.
It was suggested that some form of freedom of movement should continue which did not allow companies to bring in cheap labour from across Europe, to avoid the effect of downgrading wages in the UK. Participants pointed to a perception that jobs were being sold off to cheap labour from Europe. If free movement of workers were to continue, it should be at the same cost as local labour so that companies could make decisions based on skills rather than costs.
Generally, participants recognised the long-term opportunities created by trading with a larger, global market but feared a state of flux until those opportunities were realised, and would need something to fill the gap.
We also took formal oral evidence during our visit to Sunderland which is published on the Committee website.133
13 January 2017