Summary of the BABA US-U.K. Trade Policy Roundtable on July 10, 2024
Contributed by Astrid Ruggeri and her team, BMW Group,
Co-Chair of the Trade & Policy Committee
Overview of 2024 UK Election Brief
The UK held elections on July 4th, 2024, after then Prime Minister Rishi Sunak called for an early vote. Though the Conservative Party had ruled for fourteen years, the election marked the entry of a Labour government with Kier Starmer as the leader. The vote came during a time when the UK population had expressed great disappointment in the Conservative party and PM Sunak, with reports that the Conservative Party had not succeeded in taking any firm steps and that PM Sunak had failed to show a strong and authoritative character. In June, YouGov released survey results that showed only 19% of participants had a positive view of Sunak compared to 75% with a negative view, giving him a record low net favorability score of -56. As a result, it came as no great surprise to many in the UK that the elections brought in the Labour Party, marking a new point in British politics with an agenda that focuses on workers’ rights, new public and private investments, technology policies, and steps to strengthen the UK’s successful finance industry. Let’s have a look at a quick summary of what we can expect with the policy agenda, with some specifics to trade.
Overview of Election Results
The Labour Party was declared victorious, gaining over 400 of the 650 seats in the House of Commons on July 4th. This is a huge majority and compares to 1997 and 2001 Labour victories under Tony Blair in recent times. Unlike Tony Blair’s win; however this is not considered an affirmation towards the Labour party, but more like “we will give you a chance”. The rise of the Reform Party in the polls has been the most significant movement in this election – taking the third largest vote percentage (14%) and effectively a huge proportion of the previous Conservative vote, but only gaining four seats in the House under the First Past the Post system – compared to the Liberal Democrats with 12% of the vote and 70+ seats. Turnout across the U.K. was only 60%, the second lowest in a U.K. election since 1885 – showing the widespread dissatisfaction with U.K. politics echoed through the media in the past few years. Calls for voting reform to follow should be expected (as well as a collective forgetfulness of the referendum on this subject in the U.K. a decade ago).
Labour’s leader and Britain’s new Prime Minister Kier Starmer identified five goals for Labor’s policymaking agenda: kickstart economic growth; make Britain a clean energy superpower; take back our streets (law and justice); break down barriers to opportunity; and build a National Health Service (NHS) fit for the future. His cabinet includes a mix of experienced figures and new faces to deliver on the new government’s mandate, but at the moment there are no specific policy steps that been outlined for this agenda.
Labour Party Manifesto
· Pro-business and pro-worker
· “Securonomics” economic plan
· Goal to use public investments to unlock private investments.
· New industrial strategy:
Establish Industrial Strategy Council
· Increase focus on innovation and growth in the already strong finance sector as a measure to build on UK’s strengths. The increased investment plan includes:
£1.8 billion to upgrade ports and build UK supply chains.
£1.5 billion for new gigafactories so the UK automotive industry will become a leader.
£2.5 billion to rebuild the UK steel industry.
£1 billion to accelerate deployment of carbon capture.
£500 million to support the manufacturing of green hydrogen.
· Create a new National Infrastructure and Service Transformation Authority.
Improve rail connectivity.
Maintain and renew roads.
· Support the automotive industry.
Tackle the soaring cost of car insurance.
Support the transition to electric vehicles by accelerating the roll out of charge points, giving certainty to manufacturers by restoring the phase-out date of 2030 for new cars with internal combustion engines, and supporting buyers of second-hand electric cars by standardizing the information supplied on the condition of batteries. It is worth noting that, that this is a suggestion in their manifesto, and would require a change to the legislation put in place last year to enact. Once it is reset, it would not change again unless it was clear that this target could not be met.
· Make it easier to build laboratories, digital infrastructure, and gigafactories.
· Ensure national 5G coverage by 2030.
· Create a new Regulatory Innovation Office because “regulators are currently ill-equipped to deal with the dramatic development of new technologies, which often cut across traditional industries and sectors.”
The new office would bring together existing functions across government and help regulators update regulations. This would also speed up approval timelines and coordinate issues across existing boundaries.
· Reform the British Business Bank
This will include a strong mandate to support regional growth and make it easier for small and medium sized enterprises to access capital.
Trade
· With Securonomics, there is still an interest in being more internationalist, although no specific policies mentioned, but it would be internationalist with putting the UK brand at the heart of the it- creating a balance of looking globally but maintaining investment domestically.
Openness to free trade, but hesitant to completely opening up to China, would like to secure supply chain resilience and security. They are concerned with the rise of China, but will not react as strongly to China like the U.S., will be more on-line with EU policy, unless they get pushed by the U.S.
Focus on industrial policy and how to bring about industrial growth via a green transition. There is a possibility of replicating an IRA in the U.K.
· With the EU, again very vague overview, no specific policies but hopes to build relations, perhaps through some sort of security pact.
· The new PM has also expressed interest in a bilateral free trade agreement with the U.S.
· While the new Labour Party has not outlined specific plans for digital trade, it did include the following statement in its Manifesto:
“Labour is also committing to supporting other technologies, including open banking, open finance, and environmental, social, and governance (ESG) technologies, but little detail is provided on what this will actually entail.”
AI
· Support the development of the Artificial Intelligence (AI) sector and the removal of planning barriers to new data centers.
This includes establishing a National Data Library to bring together existing research programs and deliver data-driven public services, whilst maintaining strong safeguards and ensuring all public benefit.
This will include safe development and use of AI models by introducing binding regulation on the handful of companies developing the most powerful AI models and banning the creation of sexually explicit deepfakes.
· The Labour Party plans to pursue new AI regulations. It offered more details in this statement:
“By contrast, the Labour Party seeks to regulate AI through statutory footing by introducing “binding regulation” on the “handful of companies developing the most powerful AI models.” Importantly, this suggests that while the Labour Party does intend to introduce AI-specific legislation, this legislation will be more narrowly targeted. Notably, it will not go as far as the EU’s AI Act, an omnibus, industry-agnostic, AI-specific law. Labour also intends to ban the creation of “sexually explicit deepfakes.” Overall, the Labour Party’s approach could be a significant turning point for AI regulation in the UK with Labour having to walk a fine line between adequate regulation and promoting innovation.”
Anti-Brexit Majority
· While there do seem to be many people, perhaps even the majority of voters, who regret Brexit, there does not appear to be any initiative to re-join the EU. But there is a discussion of a possible customs union, though not likely to mature with this parliament.
In conclusion, what are some achievements that could possibly be seen in the next 5 years? Look for credibility and stability returning to U.K. politics, a potential stabilization of relations with the EU, and some progress made towards economic challenges.
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