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A new approach to the UK internal market is needed to avoid a collision course between the UK government and the devolved nations which could erode support for the union, says a new Institute for Government report.

A well-functioning internal market will mean fewer barriers for businesses, better value for consumers, and a thriving UK economy. Published today, The UK Internal market: balancing frictionless trade and regulatory autonomy sets out how the UK and devolved governments can ensure the UK internal market fills the void created by the loss of the EU single market framework, allowing for smooth intra-UK (if not GB–NI) trade while preserving the four governments’ ability to diverge.

But to avoid repeated battles over English food standards being forced upon Scotland and Wales and the risk of barriers to trade between GB and Northern Ireland increasing, the UK government must stop ignoring the objections of the devolved nations. The devolved administrations should also show more willingness to cooperate with the UK government and take this opportunity to shape the intra-UK trade system.

The UK government needs to protect the UK economy whilst respecting devolution, managing regulatory divergence between the four nations – including that created by the Northern Ireland protocol – by agreement not diktat.

The new IfG report makes four recommendations to ensure the UK internal market functions effectively:

• UK government policy coordination - a central Cabinet Office unit to consider competing economic, policy, and constitutional aims, and where necessary make trade-offs between them.
• Govern in the interest of all four nations – structures and processes must be improved to avoid the perception that the UK government is prioritising the needs of England.
• Ensure the Office for the Internal Market (OIM) commands UK-wide confidence. The OIM must quickly gather data on the functioning of the internal market and launch a review into the economic impact of existing divergence.
• Proper scrutiny – the UK parliament should organise itself to scrutinise the UK internal market, the UK government should commit to sharing relevant information with parliament, and the four legislatures should work together to scrutinise intergovernmental working.

IfG senior researcher and report lead author Jess Sargeant said:

“The decision to pass the UK Internal Market Act despite strong objections from the Scottish and Welsh governments was a low point in the relations between the governments of the UK. Undermining devolution, which is popular in Scotland, Wales and Northern Ireland, could ultimately undermine support for the Union. Brexit allowed the UK government to ‘take back control’. The same logic should apply to the devolved nations.”

IfG associate director and report co-author Maddy Thimont Jack said:

“The Northern Ireland protocol has already introduced friction. As EU rules change, and the governments in the rest of the UK introduce new regulations, it is vital that the four governments work together to prevent further trade barriers in the Irish Sea emerging and ensure that divergence is actively monitored and it implications fully considered, rather than letting it happening by accident.”

Notes to editors

1. The full report can be found on our website.
2. The Institute for Government is an independent think tank that works to make government more effective.
3. For more information, including data to reproduce any charts, please contact press@instituteforgovernment.org.uk / 0785 031 3791.