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The UK internal market: Balancing frictionless trade and regulatory autonomy

The UK government must overhaul its approach to the UK internal market.

Union Jack, Welsh and Scottish flags

A new approach to the UK internal market is needed to avoid a collision course between the UK government and the devolved nations which could erode support for the union.

A well-functioning internal market will mean fewer barriers for businesses, better value for consumers, and a thriving UK economy. This report sets out how the UK and devolved governments can ensure the UK internal market fills the void created by the loss of the EU single market framework, allowing for smooth intra-UK (if not GB–NI) trade while preserving the four governments’ ability to diverge.

But to avoid repeated battles over English food standards being forced upon Scotland and Wales and the risk of barriers to trade between GB and Northern Ireland increasing, the UK government must stop ignoring the objections of the devolved nations. The devolved administrations should also show more willingness to cooperate with the UK government and take this opportunity to shape the intra-UK trade system.

The UK government needs to protect the UK economy whilst respecting devolution, managing regulatory divergence between the four nations – including that created by the Northern Ireland protocol – by agreement not diktat.

The report makes four recommendations to ensure the UK internal market functions effectively:

  1. UK government policy coordination – a central Cabinet Office unit to consider competing economic, policy, and constitutional aims, and where necessary make trade-offs between them.
  2. Govern in the interest of all four nations – structures and processes must be improved to avoid the perception that the UK government is prioritising the needs of England.
  3. Ensure the Office for the Internal Market (OIM) commands UK-wide confidence. The OIM must quickly gather data on the functioning of the internal market and launch a review into the economic impact of existing divergence.
  4. Proper scrutiny – the UK parliament should organise itself to scrutinise the UK internal market, the UK government should commit to sharing relevant information with parliament, and the four legislatures should work together to scrutinise intergovernmental working.
Institute for Government

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