UK business leaders have urged the government to create an EU-style “trade bazooka” to safeguard Britain’s economic interests in response to Donald Trump's latest tariff threats.
As transatlantic tensions escalate, the British Chambers of Commerce stated that the UK’s “inadequate economic security” is endangering growth and jobs.
The lobby group, representing thousands of firms, called on Keir Starmer to take the lead in shielding Britain from external crises, citing “years of neglect by successive governments.”
Geopolitical tensions, the impact of Brexit, the Covid pandemic, and conflicts in Ukraine and the Middle East mean UK companies are facing an increasingly tricky global environment for international trade.
The US president last week threatened to impose “a big tariff” on the UK unless it drops a digital services tax affecting US technology companies.
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In a report outlining recommendations to help prevent the decline of British competitiveness in an increasingly unstable world, the BCC emphasized that immediate action is needed to protect companies from other countries’ punitive trade policies.
Among its top priorities was for the UK to emulate the EU by establishing a “trade bazooka” to deter other countries from making threats designed to pressure Britain into altering its economic policies.
Brussels’ trade bazooka, officially known as its anti-coercion instrument, allows the bloc to impose extensive restrictions on goods and services trade with an aggressor state.
These restrictions can include limiting access to public procurement programs and financial markets, as well as restrictions on property rights and foreign direct investment.
The BCC also urged ministers to adopt a “robust approach” to the EU’s Made In Europe agenda to ensure UK businesses are included in broader European supply chains. It called for UK firms to have a greater role in UK defense procurement, and for the prime minister to establish a new economic security cabinet committee.
The BCC stated in its report: “The government must include a ‘trade bazooka’ in its arsenal of responses to threats of economic coercion.
“New legislation should include powers for ministers to use a variety of tools, from duties to market access, to enhanced investment scrutiny and subsidy control. However, there must also be appropriate safeguards to protect UK commercial interests.”
Shevaun Haviland, the director general of the BCC, said it was evident that the government should prepare to adopt a stronger response amidst the increasingly complex global landscape.
“The UK’s inadequate economic security has become an impediment to growth, competitiveness, and national strength; yet it still does not receive the focus and urgency it requires,” she said.
The UK’s minister for trade, Chris Bryant, said: “This report accurately identifies that free and fair trade is crucial to the UK’s prosperity, and we want to ensure open markets aren’t distorted by those who attempt to use trade as a weapon.
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“That’s why we’ve already taken action, from identifying eight key sectors as part of our modern industrial strategy to strengthening supply chains to reduce our vulnerability to market shocks, and seeking views if the UK needs additional, last-resort tools to defend against acts of economic pressure if diplomacy isn’t sufficient.”
He added: “Just last month I was in Europe to advocate on behalf of businesses as part of our Made in Europe campaign, and I look forward to continuing to work with the BCC and stakeholders to keep the UK open and secure.”
Britain imposing retaliatory measures on US service-sector firms would involve risks given the extent of US economic involvement in the UK.
The US is Britain’s largest single trading partner, representing about a fifth of Britain’s global trade, and US companies also have more than £640bn invested in the UK.
Money & Markets Editor
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