16 May 2024

The Office for the Internal Market (OIM) was set up to advise the four UK governments on how changes to rules in one part of the UK impact trade between the UK nations (England, Scotland, Wales and Northern Ireland), and to report on how well the internal market is working. The OIM’s role is important because the exercise of law-making powers in each nation can lead to regulatory differences that may have a major impact on businesses and consumers across the UK.

Our advisory role helps policymakers understand the possible consequences of regulatory difference and ultimately aims to inform and improve regulatory design. In addition, our monitoring functions could also illuminate opportunities for the wider adoption and harmonisation of standards, where a regulatory approach taken by one part of the UK might also bring benefits if adopted elsewhere.

What We Know

The OIM’s 2024 Annual Report draws on the available data to suggest that the working of the UK’s internal market has not changed significantly over the past year. The four UK nations are heavily reliant on each other for trade and businesses have not reported many challenges when buying or selling goods and services from other parts of the UK.

The Annual Report also presents four case studies of how food and drink businesses have responded to proposed regulatory differences between the four nations. These are: (1) bans on single use plastic items; (2) deposit return schemes to promote recycling; (3) restrictions on the retail promotion of products high in fat, salt, or sugar; and (4) regulations relating to the use of precision breeding techniques.

These provide an interesting snapshot of how businesses are dealing with specific differential regulatory standards. In particular there is a reluctance to rely on Market Access Principles. These are the principles of mutual recognition and non-discrimination that are designed to prevent trade barriers to goods, services, and professional qualifications within the UK.

Instead, businesses outlined potential approaches including adopting a high standard that is compliant across all nations where possible, introducing two supply chains (and perhaps reducing the number of product lines to manage the costs of this), and withdrawing from selling in the part of the UK introducing the change. This highlights the importance of the OIM’s work in helping policymakers take into account the possible impacts of regulatory difference.

The Role of Academic Research

It is perhaps because the UK internal market is so well integrated and sees very little friction in terms of trade, that the sources of information on intra-UK trade are very sparse. The OIM relies primarily on the Office for National Statistics (ONS) Business Insights and Conditions Survey (BICS), and relevant data from ONS, the Devolved Governments, and HMRC. Unlike international trade, there is no natural checkpoint for gathering comprehensive data on intra-UK trade, such as customs declarations or the calculation of import duties. Information on the provision of services is even more challenging to measure accurately, because these can typically be delivered remotely and so do not necessarily involve the movement of people or goods.

Building on its Data Strategy Roadmap published in March 2023, the OIM is exploring ways to enhance our ability to measure and monitor intra-UK trade across all four nations. The available data is limited and does not provide a complete picture of the UK internal market. As noted in previous reports by the OIM, the quality of data varies between UK nations and between years. There is also no trade survey for England. The OIM is working with the ONS, NISRA, the devolved governments and other partners, to find ways to improve the intra-UK trade data. This includes looking at administrative data and innovative approaches, alongside trade surveys. In addition, we propose exploring further the differences in intra-UK trade across English regions, given some English regions (for example those that border or are in close proximity to other UK nations) will be impacted by intra-UK trade more heavily than others. However, there are a range of challenges in attempting to mitigate gaps in the data.

The OIM would like to engage with academics whose research can positively impact its future work. We are especially interested in methods for estimating the trade in goods and services between the four nations. Possible methodologies might include mixed survey methods or economic modelling. We would also like to learn more about how this sort of data is collected and estimated in other jurisdictions – in particular, federal systems around the world, where trade flows between states and regions with diverging sets of regulations.

Finally, we are very interested to learn about particular industries and markets that could form the focus of future case study analysis.

To this end, the OIM is hosting a workshop on 11 June 2024 that aims to engage with a range of stakeholders, including researchers. If you are interested in taking part, please email: events@cma.gov.uk. Alternatively, if you would like to discuss some relevant research with us, you can get in touch by emailing OIM@cma.gov.uk.

Professor Andreas Stephan, Panel Member for the Office for the Internal Market (part of the Competition and Markets Authority).