King’s Speech 2023: Economic affairs, business and trade

1. Economic outlook and policy

In March 2023, the Office for Budget Responsibility (OBR) reported that the economic and fiscal outlook had “brightened somewhat” since its previous forecast in November 2022, with the “near-term economic downturn” set to be “shorter and shallower” than previously expected.^[1] However, it also said that the economy faced “significant structural challenges”. For example, in addition to continued stagnation in productivity growth and business investment, it noted that gas prices (despite having fallen significantly from their 2022 peak) were still twice their pre-pandemic level and that labour market inactivity had risen. According to the OBR these factors meant the economy had “weak underlying momentum”.

Weak growth prospects combined with a high rate of inflation led the OBR to forecast a significant fall in living standards in the UK, with real household disposable income (RHDI) per person predicted to fall a cumulative 5.7% over the two financial years 2022/23 and 2023/24. The OBR expects living standards (as measured by RHDI per person) to partially recover but remain below their pre-pandemic level until at least 2027/28.

Given its impact on living standards, elevated inflation remains a key concern for policymakers. In spite of market expectations of a modest fall, consumer price index (CPI) inflation remained steady at 6.7% in the year to September 2023, a figure which is over three times the targeted rate.^[2] The Office for National Statistics’ measure of core inflation (which strips out commodities subject to volatile price changes such as energy and food) lowered slightly to 6.1% in September, whereas its measure of services inflation, understood to be a key gauge of domestic price pressure, moved up slightly to 6.9%.^[3]

The Bank of England’s main interest rate is currently set at 5.25%, its highest level since 2008, and the Financial Times reports that this continued evidence of “stubbornly” high inflation is “likely to harden the Bank of England’s determination to keep monetary policy tighter for longer”.^[4] Although judged necessary to bring inflation down, the Bank’s monetary policy committee (MPC) has noted its expectation for interest rates rises to “weigh increasingly on the economy”.^[5] As of 12 October 2023, Dr Swati Dhingra—an external member of the MPC—said that “we think only about 20% or 25% of the impact of the interest rate hikes have been fed through to the economy” and that the UK should be prepared for a recession, given the economy’s already slow rate of growth.^[6]

Higher interest rates have also increased the cost of servicing government debt. The Institute for Fiscal Studies reports that market expectations for future interest rates imply that by 2026/27 the government will have to spend £20bn more on debt interest than the OBR forecast back in March.^[7] As a result of these costs, the chancellor of the exchequer, Jeremy Hunt, has indicated that he will have to make “difficult decisions” in the forthcoming autumn statement scheduled for 22 November 2023.^[8]

In addition to having designated the reduction of inflation and “sound money” as key government priorities, the chancellor has also set out a framework for economic policy decisions more broadly.^[9] The framework, “against which individual policies will be assessed and taken forward”, is based around four pillars:

• Enterprise. Improve access to capital and reward for risk for the UK’s most productive growth industries.
• Education. Improve skills training.
• Employment. Reduce barriers to work to ensure that everyone who can participate in the economy does.
• Everywhere. Ensure the benefits of economic development are across the whole of the UK.

Hunt suggests that these four pillars are “essential for any modern, innovation-led economy” and working on them will help address the “structural challenges” faced by the UK economy and spur economic growth.

2. Legislation on business and economic affairs

This section considers economic and business-related legislation which may be included in the King’s Speech. There is one bill, the Digital Markets, Competition and Consumers Bill, which is being ‘carried-over’ from the 2022–23 session. The other items are areas in which the government has previously indicated it intends to introduce primary legislation when parliamentary time allows.

2.1 Digital Markets, Competition and Consumers Bill

The Digital Markets, Competition and Consumers Bill was introduced to the House of Commons on 25 April 2023. According to its explanatory notes, the bill:

[…] creates a new regime to increase competition in digital markets by conferring powers and duties on the Competition and Markets Authority (“CMA”) to regulate competition in these markets; updates powers to investigate and enforce competition law; updates and enhances powers to investigate and enforce consumer protection law and resolve consumer disputes; and gives consumers protections in respect of unfair commercial practices, subscription traps and prepayments to savings schemes.^[10]

On 17 May 2023, the bill passed its second reading in the House of Commons without division, with members from across the House expressing support for the principles of the bill. A carry over motion was also agreed on 17 May 2023, ensuring that the bill can continue its passage in the next parliamentary session.^[11]

2.2 Audit and corporate governance reform

At the time of the 2022 Queen’s Speech, the government said it would “prepare and publish a draft bill to revamp the UK’s audit and corporate reporting regime”.^[12] On 29 June 2023, in response to a question about plans for the draft bill, the parliamentary under secretary of state for business and trade, Kevin Hollinrake, said the government was keen “to take forward primary legislation when parliamentary time allows” and that “there are measures that we can take through secondary legislation” in the meantime.^[13]

A set of draft regulations to create a series of “new corporate reporting requirements for very large UK companies” were laid in Parliament on 19 July 2023, but these proposals were withdrawn on 16 October 2023.^[14] The government decided not to proceed with “burdensome” new requirements following a consultation on the existing non-financial reporting requirements, where businesses expressed a “strong appetite for existing reporting requirements to be simplified”, according to Mr Hollinrake.^[15]

The government said it “will be setting out options to reform the wider framework shortly to reduce the burden of red tape on businesses” but that it “remains committed to wider audit and corporate governance reform”. It said it would bring forward legislation to deliver these reforms when parliamentary time allows. However, the Financial Times has reported that primary legislation in this area is not expected to be included in the King’s Speech, with “government insiders” citing concerns about parliamentary time.^[16]

2.3 Building societies

On 9 December 2022, the chancellor announced the Edinburgh reforms, a set of reforms intended to “drive growth and competitiveness in the financial services sector”.^[17] The reforms included legislating to “give building societies in the UK greater flexibility to raise wholesale funds, enabling them to grow and compete on a more level playing field with retail banks”.^[18]

On 15 December 2022, Baroness Penn, Lords Treasury minister, said in response to a written question that the building society reforms would be delivered through secondary legislation.^[19] Subsequently, on 21 September 2023 Baroness Penn corrected her original statement, explaining that while some of the building society reforms could be implemented through secondary legislation (amending the Building Societies Act 1986), further primary legislation would be required to implement the remainder.^[20]

2.4 Regulatory reform

On 10 May 2023 the government published a policy document, ‘Smarter regulation to grow the economy’, which outlined the government’s vision for how it could “improve regulation across the UK economy to reduce burdens, push down the cost of living and drive economic growth”. In the document, the government expressed concern at the prevalence of “non-compete clauses”, which restrict an individual’s ability to work for or establish a competing business after they have moved on from a job. The government stated that such clauses “inhibit workers from looking for better paying roles”, as well as reducing the incentives for businesses to “compete and innovate”. As such, the government said that it “intends to legislate when parliamentary time allows to limit the length of non-compete clauses to three months”.

2.5 Employment bill

In the December 2019 Queen’s Speech, the government proposed an employment bill, intended to “protect and enhance workers’ rights as the UK leaves the EU” and follow through on a Conservative Party manifesto commitment to create a single body to enforce employment law.^[21] However, the government did not publish such a bill in the 2019–21 parliamentary session. Despite this, up to March 2022, government ministers made various public statements indicating they still planned to bring forward a bill. However, it was not included in either the 2021 or 2022 Queen’s Speech.^[22]

On 13 December 2022, the then secretary of state for business, energy and industrial strategy, Grant Shapps, said that an employment bill was no longer “on the cards”, citing the government’s support for a series of private members’ bills on employment rights.^[23]

On 30 January 2023, Angela Raynor, shadow secretary of state for the future of work, asked the government what steps it was taking to “create a single enforcement body for employment rights”.^[24] Kevin Hollinrake responded:

This government remains committed to workers’ rights and enforcement. We need to be realistic with what we can achieve and the limits of parliamentary time. We are reviewing what this means for the creation of the single enforcement body which would be a significant organisational change. In the meantime, we continue to invest significantly in the existing labour market enforcement bodies and are working with the director of labour market enforcement to ensure that they are supported to work together as effectively as possible.

On 14 September 2023, Lord Brooke of Alverthorpe asked the government whether it would bring forward an employment bill in the forthcoming King’s Speech.^[25] Lord Offord of Garvel, parliamentary under-secretary of state at the Department for Business and Trade, replied that “six private members’ bills have been brought through to enhance and protect workers’ rights” over the last parliament and that the government was “trying to strike the balance between workers’ protection and employers’ flexibility”.^[26]

2.6 Units of measurement

On 4 July 2023, Politics Home reported that “ministers are considering reviving plans to bring back imperial measurements as part of the legislative agenda to be set out in the King’s Speech this autumn”.^[27] The government published a consultation on this issue last year, ‘Choice on units of measurement: Markings and sales’, with the evidence gathered intended to “inform the government’s plans to provide a choice on weights and measures for consumer transactions”. The government said in the consultation that its review of units of measurement was “announced as part of its plans to capitalise on the benefits of Brexit” and that, having left the EU, “the UK can take back control of its measurement system and take decisions in the best interests of British businesses and consumers”. In exploring the changes, the government said:

While consistency in measurement supports fair trade and empowers consumers, there has been consistent opposition to the current law on units of measurement by some traders and consumers who consider it to be overly prescriptive and an unnecessary restriction on freedom of choice. This consultation will explore the appetite of businesses and consumers to buy and sell in imperial units.

On 19 June 2023, Kevin Hollinrake said that the government had “received over 100,000 responses to the consultation […] and will publish its response in due course”.^[28]

2.7 ‘Debanking’

On 19 July 2023, a Telegraph article said that government ministers had “ordered officials to start drafting legislation to give banks new free speech duties”, following claims that “Coutts bank had closed Nigel Farage’s accounts because his views did not ‘align’ with its ‘values’”.^[29] According to the Telegraph the plans would mean that “any bank that discriminates against a customer because of their political beliefs could have their banking licence revoked”.

On 20 July 2023, the government announced new rules whereby “banks will be forced to explain and delay any decision to close an account”.^[30] However, the government noted that the changes will only require secondary legislation and will be “delivered through the powers granted in the Financial Services and Markets Act 2023”.

3. International trade

The UK government is currently negotiating a number of free trade agreements and it has recently signed its accession protocol to accede to the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP). Parliament has a role in the ratification of international treaties (including free trade agreements) under the Constitutional Reform and Governance Act 2010 (CRAG Act 2010). Additionally, where a treaty needs to be implemented in UK domestic legislation, Parliament may need to pass legislation.

This section sets out further details on Parliament’s role in this area and the need for implementing legislation for the CPTPP. It also discusses the government’s approach to importing goods into Great Britain, called the ‘border target operating model’ (BTOM). The government has indicated that this may also require legislation.

Both the legislation for implementing the CPTPP and any legislation relating to the BTOM may be included in the King’s Speech.

3.1 Trade agreements: Parliamentary scrutiny and the need for legislation

The negotiation and signature of international treaties is conducted by the government under the royal prerogative. However, Parliament has a role in the ratification of treaties under the CRAG Act 2010.^[31] However, no debate or vote in either House of Parliament is required under the act prior to a treaty being ratified. The House of Commons has the power to delay ratification for 21 days—repeatedly, if desired—but only if the government makes time for debates and votes on the treaty. The House of Lords can vote against ratification, but the government can still proceed by making a statement setting out why it believes the treaty should be ratified.

The government has made a number of commitments regarding the scrutiny of free trade agreements by Parliament. On 19 May 2022, the government set out its commitments to parliamentary scrutiny of trade agreements in an exchange of letters with the chair of the House of Lords International Agreements Committee, Baroness Hayter of Kentish Town (Labour).^[32] This included scrutiny during pre-negotiations, during negotiations and post signature.

In addition to procedures under the CRAG Act 2010, Parliament may need to pass legislation to implement an international agreement in domestic UK law.^[33] The UK is a dualist state. This means that international treaties do not automatically become part of its domestic law. In instances where agreements (or parts thereof) need to be implemented in domestic law, Parliament will need to pass legislation. UK courts have no power to enforce treaty rights and obligations unless legislation is passed to implement the relevant treaty provisions into domestic law. Foreign, Commonwealth and Development Office (FCDO) guidance on treaties says that if domestic legislation is needed to enable the UK to give effect to its obligations under a treaty, the legislation should be in place before the treaty comes into force so that the two can come into operation at the same time.^[34] The FCDO therefore usually insists that any necessary UK legislation is in place before a treaty is ratified or acceded to.

There are also provisions under the Agriculture Act 2020 that may need to be complied with before a free trade agreement can be laid before Parliament under the CRAG Act 2010. Under section 42 of the Agriculture Act 2020 (subject to certain conditions), if a free trade agreement includes measures applicable to trade in agricultural products, the secretary of state must lay a report before Parliament explaining whether the measures are consistent with UK levels of statutory protection in relation to human, animal or plant life or health, animal welfare and the environment. The treaty may not be laid before Parliament under the CRAG Act 2010 until the section 42 report has been laid. The Trade Act 2021 amended section 42 of the Agriculture Act 2020 to require the secretary of state to request advice from the Trade and Agriculture Commission in relation to the above matters (except human life or health) and to lay this advice before Parliament.

3.2 Comprehensive and Progressive Agreement for Trans-Pacific Partnership

On 16 July 2023, the UK formally signed its accession protocol to accede to the CPTPP.^[35]

The CPTPP is a free trade agreement between the following 11 countries: Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore and Vietnam. It first entered into force for six of these nations on 30 December 2018, and entered into force for the final nation, Brunei, on 12 July 2023.^[36]

The CPTPP will enter into force for the UK once all CPTPP members and the UK complete their respective ratification processes.^[37] If all members of the CPTPP have not ratified by 16 October 2024, the accession protocol will enter into force after six CPTPP members and the UK ratify the agreement.

In its draft explanatory memorandum on the CPTPP, the UK government has stated that legislation will be needed for the UK to be compliant with the CPTPP when it enters into force.^[38] It has identified the following areas as requiring primary legislation:

• Technical barriers to trade. The government has said that implementing legislation is required because of some UK legislation requiring conformity assessment bodies to be located in the UK (or in a country the UK has a mutual recognition agreement on conformity assessment with). Primary legislation would be needed to amend “relevant technical regulations to allow conformity assessment bodies from CPTPP members to apply for accreditation and approval without the requirement to be established in the UK”.^[39]
• Government procurement. Primary legislation would be needed to amend the UK’s public procurement legislative framework in two ways. First, to give effect to the UK’s market access commitments to CPTPP suppliers, and second to ensure the framework is compliant with two technical provisions of the procurement chapter. The government has explained that these relate to procurements funded by an international organisation and to the information to be published in a contract award notice.
• Intellectual property. The government has stated that the changes required for intellectual property include changes to the grounds on which applications made to register geographical indications (GI) under Great Britain’s GI scheme for certain agriculture and food products may be opposed. It includes changes to the grounds on which applications may be made to cancel registered GIs. It also includes “expanding the eligibility criteria through which a performer can qualify for rights in performances”.^[40]

The explanatory memorandum states that procedures under part 2 of the CRAG Act 2010 will not be commenced until the obligations set out in the Agriculture Act 2020 and the Trade Act 2021 have been fulfilled.

3.3 Ongoing trade negotiations

The UK is currently conducting a number of trade negotiations with other countries. As explained above, any eventual agreement may need to be implemented in domestic UK law depending upon its scope.

The government has said that its priorities in 2023 include progressing negotiations with India, Canada, Mexico, Israel and the Gulf Cooperation Council (GCC).^[41]

Press reports in October 2023 stated that the UK and the US had entered into negotiations for a “foundational” agreement.^[42] Politico reported that the outline deal it had seen did not include requirements for a formal free trade agreement but would still cover a range of areas:

The outline deal set out in the papers does not contain the market access commitments required for a formal free trade agreement in the eyes of the World Trade Organization. But the proposed agreement would go much further than anything considered in public so far, with USTR [United States Trade Representative] proposing to deal with thorny issues like agriculture across 11 chapters which also include labor rights, the environment, supply chains, regulation of services, digital trade documents and others.^[43]

The Guardian reported that the UK’s negotiations with India would remain the government’s focus but negotiations with the US were aimed for completion before the UK and US elections:

According to a government timeline seen by the Guardian, the India deal will remain the priority, but work on the US agreement will begin in earnest in the new year, with a view to completing it before both countries hold their general elections. One consequence the documents reveal is that work on separate agreements with Canada and Mexico will have to be slowed down.^[44]

3.4 Border target operating model and single trade window

On 29 August 2023, the government published its final plans for “a new approach to importing goods into Great Britain” called the ‘border target operating model’ (BTOM).^[45] The government has described the BTOM as follows:

The border target operating model sets out our new approach to safety and security controls (applying to all imports), and sanitary and phytosanitary controls (applying to imports of live animals, germinal products, animal products, plants and plant products) at the border. It sets out how controls will be delivered through simplification, digitisation and the UK’s new single trade window.^[46]

The model will be progressively introduced from the end of January 2024. The government has said it was phasing in the BTOM for a number of reasons:

We will introduce the new model in a phased approach that balances several factors: the need for effective management of biosecurity, public health, food safety and security risks; the need to give businesses sufficient time to prepare; the need to ensure supply chains have time to adapt and are not disrupted; and the speed at which we can work with stakeholders to build the systems and infrastructure required under the new model, including the rollout of the UK single trade window.^[47]

The government stated that it “will make any required changes to legislation to support delivery of the border target operating model when parliamentary time allows”.

The government also stated that a phased approach would bring the launch of the BTOM “closer to the upcoming simplification of border requirements through the new UK single trade window”.^[48] When fully operational, the UK single trade window “will provide a single digital gateway for users to provide the data needed to trade and apply for licences and authorisations for trusted trader schemes”.^[49]

On the ‘UK single trade window’, the government has indicated that legislation on data sharing across government may be needed:

The single trade window will be introduced through a series of strategic releases, each one adding greater functionality and delivering an improved user experience. Build activity has already started, although the pace and scope of development will be dependent on delivering suitable legislation to enable sharing of data across [government]. Subject to these dependencies, the single trade window could be fully operational in 2027. We will provide a more detailed update for stakeholders on plans for implementing single trade window in the autumn.^[50]

The government conducted a consultation on the single trade window, which closed on 15 September 2022.^[51] The consultation was on the design of the window and to inform the development of any legislation that may be required. The government has said it is continuing to analyse the results and intends to publish a formal response in 2023.^[52]

3.5 Windsor Framework

The border target operating model also indicated that the government would make changes in UK domestic legislation to ensure that Northern Ireland businesses had unfettered access to the Great Britain market, in line with the Windsor Framework:^[53]

In line with the Windsor Framework, we will ensure that Northern Ireland businesses have unfettered access when moving qualifying goods to their most important market in Great Britain. These arrangements will be enshrined and further strengthened in domestic legislation, avoiding burdens for Northern Irish goods on both direct Northern Ireland-Great Britain and indirect Northern Ireland-Ireland-Great Britain routes.

For further information on the Windsor Framework see the House of Lords Library briefing ‘King’s Speech 2023: Devolved affairs’ (1 November 2023).

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Cover image by Chuttersnap on Unsplash.