Reeves has ‘given up on growth’ as Chancellor extends growth-destroying dynamic alignment approach beyond SPS

Responding to Rachel Reeves’ Mais lecture, The Growth Commission today laments that the Chancellor appears to have “given up on growth”.

The body of thirteen independent economists today publishes a new estimate that adoption of EU energy, food, agricultural and other regulatory policies – including potentially digital policies – would reduce UK GDP in total by an alarming 6%.

New research produced by Growth Commissioner Douglas McWilliams shows that if the Government’s EU ‘reset’ implies adopting all EU digital legislation, it would likely reduce the size of the UK’s thriving digital sector by around 25% and put half a million digital jobs at risk, not to mention further jobs in the wider economy as a result of reduced digital competitiveness.

The digital sector is the UK’s fastest growing sector, having grown at 6% compound over the past decade and by 3% in each of the past two years when the overall economy has only grown by 1% annually. But McWilliams estimates a hit to the UK’s GDP of over 3% in the long term if the UK realigns with the EU for its digital sector.

The Chancellor’s rejection of The Growth Commission’s Smart Net Zero submission on energy – that she should abolish the Energy Profits Levy and only pursue environmental targets where the benefits justify the additional cost – is estimated to reduce GDP by 2.2%.

Other elements of her EU ‘reset’ are also likely to damage growth. The Growth Commission has already called out the likely hit to the British economy of dynamic alignment with EU sanitary and phytosanitary (SPS) regulations covering agriculture and food standards, with these measures alone estimated to reduce GDP by 0.5%.

Growth Commission Chairman Shanker Singham says:

“It is hard not to conclude from her intervention today that the Chancellor appears to have given up on growth. Hardwiring into UK law regulations which are already costing EU economies dear would be a monumental act of self-harm that in sectors like food and agriculture would be extremely difficult to reverse given how supply chains get locked in over time.

“The European regulatory system is one of the most anti-competitive and growth-destroying regulatory systems in the world, which has led to stagnant growth across the continent. With a pressing need to grow its economy, the last thing the UK should be doing is aligning to European regulations.”

Growth Commissioner Douglas McWilliams adds:

“The war in the Middle East had already put the fledgling recovery at risk. If as Reeves’ speech suggests, we now adopt EU energy, food and agricultural policy, and lock into their heavy regulation of the digital economy, growth will be killed stone dead.”