Focus on growth: Brexit Q&A with CBI Scotland director Tracy Black

Tracy Black, director of CBI Scotland

The CBI has been at the forefront of discussions on Brexit, what’s it like to step into the role at such a challenging time?

Having started as deputy director last year, I’ve given myself time to get to know the challenges and opportunities faced by businesses here in Scotland. It’s my job to ensure our members’ views are heard loud and clear at both Holyrood and Westminster.

Getting a good Brexit – by securing transition in March, remaining in a customs union with the EU and maintaining a deep relationship with the single market – is a major priority for Scottish businesses.

Access to people is as important as future trading arrangements, particularly against the backdrop of Scotland’s demographic situation. And we mustn’t neglect the importance of making progress with productivity to get our economy growing more quickly.

So while there’s a lot to do, I’m hugely excited by the challenge.

What specific issues does Brexit pose for Scotland?

You only need look at Scotland’s economic strengths: education, energy, agriculture, tourism, financial services, manufacturing. What keeps those industries running? Two things – people and trade.

Access to skills and labour has been a longstanding problem for Scottish firms – continued uncertainty over whether firms will be able to access people from Europe will only heighten these concerns.

The numbers make it clear. More than three-quarters of Scottish companies expect to create more high-skilled roles in the coming years, but 59 per cent are not confident about filling them.

And it’s not just high skilled workers. Our agriculture and tourism sectors need to attract talent at all levels, including temporary and seasonal workers – how they achieve that is a major unanswered question. 

And then there’s trade. It’s hugely important for manufacturing, but Scotland also has an amazing footprint in financial services, with leading banks, a superb insurance sector and a trailblazing fintech hub. How will our current arrangement be replaced without losing our competitive advantage?

These aren’t Scottish-specific issues – they matter in Newcastle, Newry and Newport too. But it’s vital they’re understood by politicians in all corners of the UK.

How will individual companies be affected by Brexit?

With so much attention given to the political ins and outs of Brexit, you could easily be forgiven for thinking that Brexit is just a thing that happens at a political and diplomatic level. But this matters in reality, in the economy, in shops, factories and offices across Scotland because it’s business that will deliver Brexit.

Particularly in Scotland’s bigger companies, there’s a huge amount of work happening in boardrooms to try and figure out how to adapt to Brexit. When you’re talking about something this big, it can affect how a company hires people, picks suppliers, which customers it targets, and its plans for expansion or exporting.

Brexit negotiations are scheduled for the end of March. What does CBI Scotland want to see come out of the talks?

When talks on the UK’s future economic relationship with the EU begin, negotiators face a monumental task in untangling 40 years of integration.

Finding a new way to manage the relationship between the UK’s rules and the EU single market as both evolve will be one of the most challenging areas to tackle in the coming months of talks. There will be tough decisions and compromises to make, and negotiators must put jobs and living standards first when making those calls.

In her Mansion House speech, the PM set out an ambitious vision for a ‘broad and deep’ future agreement with the EU. Importantly for Scotland, and across the UK, she highlighted the importance of the UK’s financial services industry.

by Savvas Savouri, Toscafund Asset Management

The UK’s post-Brexit relationship with the EU will be almost indistinguishable from what we have now

And it was also welcome that the PM made data a priority – every sector will support the goal of strengthening the UK’s £240bn data economy through a bespoke data deal. However, there are a number of sectors that will not be much clearer on the UK Government’s intentions.

Having looked at the evidence, and listened to the majority of our members, we are clear that a customs union with the EU and a deep relationship with the single market will be best for jobs, investment and living standards.

The UK Government recently ruled out the CBI’s call for the UK to maintain a customs union with the EU. What does that mean for business?

The UK Government has three objectives for its new customs union relationship: frictionless trade with the EU, no hardening of the Irish border, and an independent international trade policy. To be clear, those objectives are fully backed by Scottish business, they’re absolutely the right ones.

But so far, government hasn’t brought forwards any proposals that deliver on all three of those. What’s on the table today will lead to friction and/or a border.

Unless and until the Government devises proposals that do achieve its objectives, we should stay in a customs union. If there’s another way, let’s do that! But we haven’t seen it yet.

Why do some of your members oppose staying in a customs union?  

For some of our members, maintaining a customs union with the EU just wouldn’t be a priority.

Many of our best exporters, particularly in areas like food and drink, have different views on the issue. They have spent years, often decades, building up relationships across global markets and for them, maintaining a customs union with the EU isn’t a priority – some even view it as a potential hindrance and have argued that it could hamper the ability to secure improved trade deals globally.

While we respect these opinions, our view is that this isn’t an either/or situation. By staying in a customs union, we can start our trade negotiations in the confidence that we already have 50-plus free trade agreements in place.

Germany is a great example in that respect. They do nearly five times more trade with China than we do and they achieve that from within the customs union – that’s surely a sensible example to follow.

Overall, what does the future hold for the Scottish economy?

While Brexit has undoubtedly dominated the headlines and caused much uncertainty, Brexit or no Brexit, the Scottish economy faces a number of real challenges in the coming years.

Growth still lags behind the rest of the UK, and we remain trapped in what the Fraser of Allander Institute calls a “cycle of weak growth”. Correcting the course won’t be a quick fix, and it will require focusing more clearly on the fundamentals of the Scottish economy. That means a relentless pursuit of increasing productivity growth, as outlined in CBI Scotland’s ‘Pursuing Prosperity’ report.

We need to better calibrate our education and skills system to meet the needs of modern business; support and encourage firms to look to global markets; embrace innovative management practices and make a commitment to boosting transport and digital connectivity.

Maintaining Scotland’s competitiveness is key. Scotland is a great place to live, work and do business. If we get these things right, we’ll also be a lot more prosperous too.