Recommendation 5

HM Government Deferred

Intra-UK trade The Office for the Internal Market (OIM), which sits within the CMA and was established by the UK Internal Market Act 2020, has a statutory obligation to monitor and report on the operation of the UK’s internal market and developments as to the effectiveness of the operation of that market. It is required to prepare an annual report and the first of these is due to be prepared by 31 March 2023. This report must be laid before the legislatures in each of the UK nations.8 The report will contain a combination of quantitative and qualitative analysis of relevant evidence. The Committee may also find it useful to review a report prepared by the OIM earlier this year that set the scene for the monitoring work it is required to carry out.9 The CMA will provide a note to the Committee after the 2023 annual report is laid, setting out information or findings relevant to the Committee’s interest in intra-UK trade and its impact on competition. 8 These reports will not review the impact of the Northern Ireland Protocol (or legislation necessary to implement it) on the operation of the UK internal market, because reviewing or monitoring the NIP, or legislation implementing it, is outside the scope of the OIM’s work. 9 Overview of the UK Internal Market - GOV.UK (www.gov.uk) Post pandemic economic growth: State aid and post-Brexit competition policy: Government Response 15 UK-EU trade Openness to international trade is generally positive for competition.10 By creating pressure on domestic firms to operate efficiently and to innovate, and by providing successful firms with access to larger markets, the additional competition created by international trade is also likely to improve productivity.11 Since the end of the Transition Period, UK-EU trade has fallen.12 This has been partially offset by a reorientation of trade to non-EU partners, though the OBR notes that the overall trade intensity of the UK economy has declined13 and it assumes that this effect will persist over the long run.14 Overall, a reduction in trade intensity would normally be expected to reduce competition,15 with the effect likely to be more significant in markets that have seen the most significant increase in trade barriers, and/or where EU imports previously accounted for a high share of total consumption. An analysis of the cost to business of conducting UK-EU trade, and how this has changed following the end of the Transition Period, falls outside the CMA’s remit. However, the CMA will update its analysis of the effect of international trade on concentration in its next State of Competition report, which is currently planned to be published before September 2024.