John Wallace is managing director and head of real estate at solicitors Ridgemont
The UK may still be hurting from Brexit, but the Pacific trade deal is a step in the right direction. Member states benefit from free trade, consistent trade rules and the recognition of each other’s local qualifications. A government report dated July 2023 suggests that UK construction companies will benefit from tariff-free imports and exports, flexible rules of origin and stable market access (for service providers).
“There is a long way to go to cure the damage caused by Brexit”
The government is committed to joining the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP). It formalised this by the signing of the accession protocol on 16 July 2023, which provides cautious optimism during a perfect storm for contractors, subcontractors and construction product manufacturers. The combined GDP of member states of the CPTPP is £12 trillion, and represents 14 per cent of the world’s global GDP, according to the Confederation of British Industry.
The CPTPP trade agreement was established in 2018. Signatories include Australia, Brunei, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, Vietnam and Canada. Other nations seeking membership include China, Taiwan, Ecuador, Costa Rica and Uruguay. Whether Taiwan’s or China’s application to accede will be endorsed by the UK will be an interesting development to watch.
It is expected that the Indo-Pacific region will account for 54 per cent of global growth between 2010 and 2050; and by 2035, half of the world’s middle-class consumers will be in the region. This is tempered by the fact that CPTPP membership, presently at least, only covers a small section of the region. You can see the potential though.
Cutting red tape
The impact on the UK construction sector is likely to be marginal, although there is potential for incremental growth as more states join the CPTPP. The government report estimates that the construction sector will benefit from the CPTPP to the tune of more than £119m. That, in itself, is not cause for wild celebration, given it represents 0.001 per cent of the UK construction sector’s £117bn GDP. However, for certain participants in the industry, particularly those who already do business in CPTPP member states, UK membership will reduce the administrative and financial burden.
The CPTPP rules may make it easier for those exporting construction goods to benefit from more attractive conditions than under existing bilateral treaties, such as where a UK company imports construction materials from a CPTPP member state, processes them in the UK and then exports a construction product to a CPTPP member state. Such transactions will also be easier as the CPTPP encourages efficient, consistent, transparent and predictable customs procedures when member states are doing business with other member states.
For those providing services to CPTPP member states, such as, perhaps, architects, surveyors or engineers, the agreement encourages countries to recognise each other’s professional qualifications and seeks to facilitate business travel. This will make it easier for highly skilled construction professionals to supply services to member states. Visa entitlements will be extended for some member states under the regime.
The damage to the construction sector caused by Brexit remains. The government’s assertion that our once close trading relationship with EU member states would be replaced by a series of bilateral treaties was met with some cynicism. The reality is that, CPTPP aside, only two trade agreements have been signed since the UK left the EU: a 2021 agreement with Australia and a 2022 treaty with New Zealand. The government remains in negotiations with India, Canada, Mexico, the Gulf Cooperation Council (Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the United Arab Emirates), Israel, Switzerland, South Korea, Turkey and the US.
There is a long way to go to cure the damage caused by Brexit. Between 1999 and 2007, the EU accounted for 50-55 per cent of UK exports. By 2022, that had fallen to 42 per cent. More needs to be done to open up new markets to the UK construction sector, but acceding to the CPTPP is a step in the right direction And, as more states join, there is room for optimism that it will have a substantive impact on the construction sector in the future.
