Written evidence from the Union of Shop, Distributive and
Allied Workers (BRP0012)

Usdaw is the Union of Shop, Distributive and Allied Workers.  Usdaw is the UK's fifth largest trade union with 435,000 members in a range of sectors such as retail, distribution warehousing, road transport, food manufacturing, dairy and pharmaceutical.

In relation to this consultation, Usdaw organises in the pharmaceutical manufacturing and wholesale sectors with agreements and membership across both sectors.

Market access: how important is free access to the Single Market? What would be the impact of trading with the EU under WTO rules and tariffs? How significant are tariffs compared to other costs?

EU Trade in pharmaceuticals has increased exponentially over the past 15 years. It is no coincidence that this increase in trade is associated with the integration of the EU trade chain. According to figures published by the European Federation of Pharmaceutical Industries Association the UK is a key player in the EU Pharmaceutical market, constituting 10% of the EU’s total production and employment.

The Union is of the belief that maintaining continuity and avoiding any disruptions to existing trade partnerships between the UK and EU countries is essential. Leaving the single market would mean that medicines manufactured in the UK would be considered imports by EU states which raises the prospect of companies shifting manufacturing operations to other countries in an effort to avoid any new import tariffs or trade barriers.

This effect could be exacerbated by the fact that in both R&D and manufacturing it appears that pharmaceutical companies prefer investing in new plants and new employees rather than utilising existing equipment and skills.

Usdaw has serious concerns that any disruption to the UK's access to the EU and the single market could hit sales and could have a detrimental impact on jobs in the sector.  Many of the major pharmaceutical employers we have agreements with have made organisational restructures within the past year. Further disruption resulting from restrictions to market access could lead to further job losses in the sector.

Non-tariff barriers: how significant are non-tariff barriers potentially arising from leaving the Single Market and Customs Union? What are the most significant ones? How best could impacts be mitigated?

Non-tariff barriers could have negative effects on pharmaceutical trade. There could be delays in transferring pharmaceutical products to and from the UK if border checks were resumed and immigration control strengthened. These bottle necks would cause longer lead times and increased paperwork which in turn could affect service levels and margins, particularly for pharmaceutical products with a short shelf life. As a result of delays, perishable pharmaceutical products are likely to cost more for UK residents.

Usdaw would like tariff-free access to the single market maintained.

Border controls for the movement of products should be avoided as these will cause additional delays, wastage and cost for businesses, governments and consumers. This matters particularly for Ireland, the only country that shares a land border with the UK.  It is vital that disruption to established supply chains for both UK and continental European pharmaceutical businesses and their customers is avoided.

The best strategy to reserve benefits for both the EU and UK is to maintain the existing relationship between the two parties on all the related aspects.

The free movement of people is also crucial to the sector. Many researchers rely on this for intra-EU collaboration on clinical investigations. If movement is restricted, access to innovative drugs may be impacted. The pharmaceutical industry relies on a skilled workforce. Some of the specialist skills needed are not yet available in the UK, which means that freedom of movement needs to be maintained. The industry needs to be able to bring in specialist contractors at times. It is also vital that multi-national companies can move their staff between different countries to gain experience and skills. Brexit should not stand in the way of development opportunities.

If the UK continues to maintain the EU agreed standards then non-tariff barriers may not pose a significant difficulty.  However, if the UK sees this as an opportunity to establish new rules and standards they will still need to conform to EU standards to trade with the EU. 

Regulation: what are the opportunities and potential disadvantages of seeking regulatory divergence from EU product, safety and other standards? To what extent should the UK seek to retain influence on these standards? Is it preferable for the UK to: establish an EU association agreement (or equivalent); replicate EU regulation; diverge from EU rules and standards? What dispute resolution processes would be most desirable? Should the UK seek to align professional qualifications with those in the EU?

Leaving the EU without any trade agreement could place extra financial pressures on pharmaceutical manufacturers as UK businesses would have to establish drug safety and approval operations to ensure compliance with EU regulations in order to maintain continuity of trade. The European Medicine Agency, which approves medication for use across the EU, is currently located in London but is likely to move regardless of whether agreement on regulatory framework is reached. If a post-Brexit agreement on shared regulatory framework cannot be reached, access to both markets would be subject to additional burdensome non-tariff processes.

It is important that any review of existing regulations or the introduction of new regulations should the UK not adopt the status quo does not create burdensome non-tariff barriers.

Skills: how dependent is the sector on workers from EU countries, at all skill levels? What is the potential impact of restrictions on freedom of movement? How far can gaps be filled by UK workers?

The UK is dependent on EU workers at all skill levels.  Some Pharmaceutical operations rely heavily on EU workers, from pharmaceutical manufacturing to wholesale distribution.  Pharmaceutical companies are very concerned about the ability to continue their operations without their migrant worker employees.

Usdaw does not collect data on the migration status of our membership. We have contacted the national pharmaceutical employers that we deal with for their data who have advised us that they have EEA nationals working across the companies and at almost all levels, ranging from warehouse workers to company directors. The vast majority of workers are on permanent contracts. The employers have informed us that they are exploring contingency plans if migration is more restrictive, considering what additional measures might have to be taken to secure their existing EEA workers within their business. They have also reported that without knowing what will happen, it is extremely difficult to work out contingency plans. However, with around 15% of one of our employer’s workforce potentially ineligible to work for the company, this would create enormous difficulties, especially in some areas of the business where the levels are higher (approximately 30%).

Whilst Usdaw does not organise in the Research and Development arm of the Pharmaceutical industry it recognises the importance of the free movement of people in clinical investigations and academia. Within the pharmaceutical industry, the UK has long been a centre for research and development activities. In 2015, it contributed 20% of the EU’s total R&D. These activities rely heavily on skilled labour supply. Currently, the UK attracts a large number of skilled workers from abroad, mainly from the EU. 

If travel between UK and other EU countries is restricted, the loss of labour will undoubtedly affect the industry in more ways than one.

Usdaw wants to see a fair migration policy which stops exploitation.  The Government must tackle the exploitation of vulnerable migrant workers and the undercutting of local labour markets.  This must be done through measures to strengthen and enforce labour regulation and extending collective agreements between trade unions and employers to workplaces with significant employment of migrants.  The Government also needs to address the genuine concerns of working people about the impact of migration on stretched public services, transport and housing.  We would like to see a managed migration system.  The Government needs to act and provide significantly more funding for training, so skills needed for the future can be developed In the UK workforce.

Potential gaps in the labour market can only be filled by UK workers if sufficient skills training is put in place. Between 2010/11 and 2015/16 the Government's adult skills budget was cut by 41%.  The retail/wholesale sector where the majority of Usdaw membership is employed experienced a skill shortage vacancy density from 2015 to 2016 of 20%.  The employer spend on workforce training had not increased since 2011.  Usdaw has always been keen to engage with employers around apprenticeships.

IPPR research has revealed that UK employers invest half as much per employee as the EU average in vocational training.  Countries such as Belgium, Germany and Sweden spend well above the average, despite the fact that these countries also have a significant number of migrants in their labour force who clearly are not being used as a substitute for investing in training.

Part of the reason why training policies in the above countries are more effective at supporting industrial strategies is that they take a social partnership approach, something that is lacking in the UK.  Like the TUC, Usdaw is concerned that since 2010 UK governments have withdrawn support from sector skills bodies that involved trade unions, for example sector skills councils.  At the same time, union representation on many of the remaining bodies has been weakened.  Appointments to the board of the Institute for Apprenticeships earlier this year did not include anyone with a trade union background.

In terms of skills, Usdaw is of the view that the Government should increase investment in both workforce and out of work training to the EU average within the next five years as well as language skills for migrants.

The Government should introduce a new lifelong learning account, providing the opportunity for people to learn throughout their working lives.  Usdaw is concerned that Union Learn Fund grants provided by the Government have been drastically cut over recent years:

R&D: How significant are EU-dependent R&D activities within the sector’s broader research landscape? What R&D collaboration, funding and access to facilities and resources is the UK in danger of losing as a result of Brexit? How can future collaboration, funding and resource/facility access with EU countries be best secured?  How can the UK best retain influence in EU and international research programmes?

Usdaw does not have members working in the industry's research and development arm and therefore, at this time, has no comment on this topic.

Trade opportunities: what opportunities are there for the UK to improve exports to countries outside the EU? Where should the Government seek to prioritise in terms of trade deals?

The EU is without doubt the UK’s most important market for the Pharmaceutical sector.

Nevertheless, there are the opportunities to set individual tariffs and standards and agree bespoke arrangements with other countries outside of the EU.  The US and Canada have a combined global share of 48% of the market in terms of value and enhanced trade opportunities with these countries would be plausible if companies can adhere to the respective countries regulatory framework.

Trade unions, as the official bodies representing the workers, need to be fully consulted and be at the heart of influencing decision makers when trade deals are being negotiated.

As a trade union, Usdaw, believes in protecting the rights of all workers, as well as promoting and upholding the Universal Declaration of Human Rights.  We believe that putting trade provisions which promote labour standards into trade deals actually increases the value of the deal, and should be looked upon as a benefit rather than a hindrance to business.  This is examined and exemplified in detail in the 2016 ILO report 'Assessment of Labour Provisions in Trade and Investment Arrangements'.

Usdaw has serious concerns that the deregulatory side of some international trade agreements could be against the interests of UK consumers and employers.  The controversial investor court system (ICS) – as we have seen in the CETA deal, or indeed – investor–state dispute settlement (ISDS) system from TTIP – may allow corporations to challenge governments over policy which may impair their profits – such as health and safety, wages and conditions. 

Transitional arrangements: what should the UK seek in transitional arrangements and for how long should they apply?

From the UK's point of view transitional arrangements should maintain the current status quo on tariffs and regulatory framework until we have agreed new terms with the EU as a minimum.  However, the EU may have other ideas, so negotiation is essential to retain the full access to the EU pharmaceuticals market which is a major market for the UK pharmaceutical industry. Usdaw would expect that the purpose of transitional arrangements would be to allow the UK Government time to negotiate a comprehensive trade deal with the remaining 27 EU Member States. Usdaw does not want to see such negotiations take place within a backdrop of an absolute deadline. Therefore, whilst such negotiations should be completed as quickly and efficiently as possible, the transitional period should remain in place until such negotiations have been completed.

However, Usdaw is not currently aware of a better outcome from the Brexit negotiations than maintaining our membership of the single market. Under such a scenario, there does not seem to be a significant reason for a transitional period.

November 2017