The Office for the Internal Market (OIM) has today published its has today published its second Annual Report on the UK's internal market. The report finds little evidence, over the last year, of substantial change in the functioning of the internal market due to differing regulations used by the 4 governments across the UK following Brexit.
Trade between the nations is valued at around £190 billion a year, with manufacturing, wholesale and retail sectors most likely to trade intra-UK.
The report finds that:
- the majority of businesses that trade within the UK do not experience challenges when selling to other UK nations
- proposals for differences in rules and regulations between the 4 UK nations, particularly in the food and drink sector, have increased over the last year
- businesses are adapting to differing regulations in a variety of ways
- policy design can influence how easily businesses can respond to regulatory differences
This year's Annual Report has been expanded to cover services and the regulated professions as well as goods, in total covering 22 areas where regulatory developments look likely. The OIM also carried out 4 case studies to understand better how businesses are working with regulations across the internal market. The 4 studies covered trade in: single-use plastic products; drinks container deposit return schemes; high fat, salt and sugar foods; and gene-edited precision bred foods.
Overall findings from the case studies revealed that larger businesses are likely to adhere as closely as possible to local regulations, in all the nations they trade, rather than relying on the Market Access Principles, which allow them to meet only their originating nation's criteria. For example, companies are likely to use single-use cutlery, plates and bowls which are acceptable to differing rules across the UK, rather than choose a product which meets just the originating nation's rules. In this way, larger businesses are establishing their own UK-wide norms that go beyond individual policy making by each of the governments.
Small degrees of divergence in regulations are easier for businesses to handle than differences that require fundamentally different approaches. For example, with labelling, if each nation were to implement different rules on the minimum size of a particular food label, by working to the strictest rules of each nation, a label can be produced which is valid in all nations.
Similarly, regulations that have effects earlier in the supply chain are more challenging for businesses to address than regulations that impact later stages in the production process. This is evident in the precision breeding (PB) of seeds, where grain farmers in England may be unlikely to plant PB seeds, despite the advantages in yield and reduction in pesticides. This is, in part, because flour millers, maltsters, feed compounders, bakeries and distillers in Scotland and Wales would not buy PB products if they are not permitted to use them in their processes.
These findings demonstrate how policy makers might be able to adjust policy design in order to minimise internal market impacts.
The emerging picture of the internal market is that regulatory differences are starting to build up, albeit slowly and with goods affected more than services, especially in the food and drink sectors. However, businesses are adapting creatively to the new regulatory system and finding ways to preserve existing trade flows and supply chains.
OIM Panel Chair, Murdoch MacLennan, said:
The publication of this Annual Report marks another important step for the Office for the Internal Market, as we have expanded our analytical focus to include services and regulated professions, as well as goods.
Proposed changes to regulations since the UK Internal Market Act came into effect have been incremental and gradual but are nevertheless starting to accelerate; the findings contained in the report are therefore important for both governments and businesses.
The OIM published an intra-UK trade data strategy roadmap last year and will provide an update on this later in the spring.
Consumers and businesses can report issues with the UK internal market by completing OIM's webform here.
