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Investors Reflect on Brexit Challenges at UK Investment Summit

As the International Investment Summit gets underway, many investors are grappling with a crucial question: why would a business choose to operate in a country that has distanced itself from the world’s largest trading bloc? This concern underscores the ongoing impact of Brexit, which continues to be a significant barrier to trade.

Rather than a sudden economic collapse, Brexit has resulted in a gradual loss of talent, investment, and growth—a trend that has become increasingly evident as the world emerges from the pandemic. Research by Aston University has revealed a staggering 27% decrease in UK exports and a 32% drop in imports from the EU since 2021, leading to an annual economic loss of approximately £183 billion.

Businesses are facing numerous challenges as they navigate this new landscape. The implementation of the Brexit border tax has made it prohibitively expensive to import agricultural goods, sparking a wave of complaints regarding exorbitant fees and delays. Complicated VAT rules, which vary across 27 EU member states, have created significant bureaucratic hurdles. Additionally, the creative sector is suffering a decline in touring contracts due to restrictions on visas and work permits. The previous government had to extend financial support to the automotive and steel industries to keep them afloat, and industries such as chemicals and pharmaceuticals are now looking for similar assistance. The higher education sector, which has long been a significant contributor to the UK economy, continues to struggle after being excluded from programs like Horizon and Erasmus, not to mention the drop in international student enrollments.

Despite these challenges, the current discussion does not advocate for an immediate return to the EU. Although there’s potential support for a rejoining referendum—feedback suggests it could be won, yet public sentiment remains wary of reigniting past divisions—simply rejoining is not a viable solution. The lengthy process of detaching from the EU cannot be reversed overnight, and businesses urgently need clarity as they plan for the coming year and a half following the economic uncertainty created by Liz Truss’s recent mini-budget.

This scenario calls for a candid discussion about Brexit’s purported benefits and a commitment to constructive engagement from all parties involved. As the country showcases its production and innovation capabilities at the summit, it also needs to demonstrate political leadership. Outlining a strategic plan for post-Brexit recovery would help attract investment by portraying the UK as a cooperative partner in Europe rather than a reluctant one.

Many business leaders have expressed a willingness to increase their investments if the UK aligns its regulations more closely with those of the EU. This concern highlights the importance of accepting proposed amendments by crossbenchers to the product regulations and metrology bill. These adjustments would assure businesses that they will not have to choose between adhering to UK or EU standards, and any divergence would require parliamentary approval, thereby reducing the bureaucratic burdens associated with Brexit.

This is merely the starting point. Establishing comprehensive agreements on food safety as well as animal and plant health could alleviate the current chaos at UK ports. Moreover, joining initiatives like the pan-Euro-Mediterranean convention would simplify cross-continental trade. Regarding mobility, rather than outright dismissing proposals, the UK should actively negotiate a youth mobility agreement that sets clear limits on travel but fosters easier movement for those with business, educational, or employment ties to the EU. Historically, Europe has shown a willingness to negotiate mutually beneficial terms, especially in light of future reviews of the trade and cooperation agreement.

The notion that Brexit could position the UK as Europe’s version of Singapore has largely proven unrealistic in the context of modern supply chains. The new barriers, red tape, and logistical burdens resulting from exiting the EU pose significant hurdles for investors attending this summit. With economic growth in a precarious state, it is essential for the UK not to overlook the importance of its immediate European neighbors, nor should it rely on trade agreements with distant nations to fill the gap.

While not all issues stemming from Brexit can be resolved, there are actionable steps to alleviate some of its adverse effects. For the notion of “global Britain” to resonate, the country must also strive to be a good neighbor, fostering positive relationships while remaining an engaged international player.

Source
www.theguardian.com