Scottish Firms Impact Test
The options section of the toolkit stresses the need to consider the impact on different sectors and groups and to work with stakeholders to validate assumptions –particularly businesses. This section of the toolkit addresses the key challenge of thinking and gathering evidence about the impact on specific industries, firm types and businesses of different sizes.
- Will it have an impact on the competitiveness of Scottish companies within the UK, or elsewhere in Europe or the rest of the world?
- How many businesses and what sectors is it likely to impact on?
- What is the likely cost or benefit to business?
- Is this measure likely to impact on international trade and investment? Please provide a description and assessment of the rationale.
- Where appropriate, consider how the options under consideration relate to relevant international standards, including the reasons if not following relevant international standards.
In assessing business impact you should:
- remember that many business sectors have representative organisations, e.g. Scottish Financial Enterprise, Scottish Engineering, Scottish Manufacturing Advisory Service, and will be willing to help you complete your BRIA. A range of other business organisations may also have an interest, including CBI (Scotland), the Federation of Small Business (Scotland), the Scottish Chambers of Commerce, the Institute of Directors (Scotland), and the Scottish Council Development Industry.
- Make clear where impacts will or could be different for different parts of an industry, (e.g. banks and building societies, rather than financial advisers), or different parts of a supply chain (e.g. manufacturers, rather than wholesalers or retailers).
- Always consult the STUC and/or relevant trade unions.
- SIC codes (or ‘Standard Industrial Classification’ codes) are a widely recognised means of classifying business establishments by their type of economic activity. By using these codes you can ensure clarity. An index of the SIC codes can be found online.
However, a core element of the BRIA approach is that you should identify, visit and consult 6-12 businesses – of varying sizes and sectors as appropriate likely to be affected by the policy proposals being developed in order to quality assure any separate assessment of what the likely cost or benefit to business will be. Engagement with companies should be face to face and officials should visit the company wherever possible. In broad terms each visit will involve discussing what the legislation might or will do and what that might mean to the business. With each business work out the impact and cost to the business both in monetary and other terms.
Impact on small businesses
You must look in particular at the impact on micro and small businesses. The assessment of the impact on small business should therefore include consideration of the following issues:
- the variation in the regulatory burden between a self-employed, micro, small, medium and a large business;
- whether compliance flexibility options could assist a micro, small, medium business to meet the requirements of the proposal;
- the distribution of benefits of the proposal between a self-employed, micro, small, medium business;
- the extent of compliance by a self-employed, micro, small, or medium business versus large business; and
- the relative impact on a self-employed, micro, small, or medium business of penalties for non-compliance – for example, by expressing costs as a percentage of turnover.
Support with engaging relevant businesses
The independent Regulatory Review Group (RRG) recommended this broad approach to Ministers and members have agreed to provide advice and support exceptionally where there is uncertainty about whether there will be an impact on business or difficulty accessing an appropriate range or number of business contacts.
Please contact the Better Regulation team if you think you need this support at BetterRegulation@gov.scot
Following departure from the EU, the UK is responsible in its own right for remaining compliant with international obligations, including with respect to the World Trade Organization (WTO), and Free Trade Agreements. This obligation extends to devolved matters, meaning that new policy and regulations introduced by Scottish Ministers are potentially subject to legal challenge if they do not comply.
The purpose of these questions are to ensure that:
a) policy makers are giving due consideration to the impacts that regulatory policy could have on international trade into, and out, of Scotland, and
b) policy teams have factored the potential notification responsibilities that may arise from this into their timelines for policy development and legislation.
The WTO is the international body which establishes and manages the rules of trade between nations. Its main function is to ensure that trade flows as smoothly, predictably and freely as possible. This is achieved through its overarching principles of non-discrimination between member states and transparency.
In order that the international trading environment remains stable and predictable, members are required to notify measures relevant to particular WTO Agreements. These include, but are not limited to, the following:
- The Technical Barriers to Trade (TBT) Agreement requires WTO members to notify in advance changes to technical regulations, standards and procedures for assessing standards conformity.
- The Agreement on the Application of Sanitary and Phytosanitary Measures (SPS) concerns the application of food safety and animal and plant health regulations. It requires members to notify measures takes to ensure food is safe for consumers, and to prevent the spread of pests or diseases among animals and plants.
- Agreement on Subsidies and Countervailing Measures (SCM) addresses the use of subsidies by governments that may have an impact on trade.
- The Government Procurement Agreement (GPA) sets out the framework for government procurement of goods and services between WTO members. , ensuring that suppliers of goods and services from other member states are treated no less favourably in securing government procurement than domestic suppliers.
There are other WTO Agreements which could have implications for Scotland's policy making, for example in agriculture, fisheries and services trade.
Each agreement contains specific requirements for notifying other WTO members of policy and regulatory changes, and criteria for determining whether a measure is notifiable. The reference or otherwise to international standards is a material factor.
Compliance with WTO obligations can also help to meet similar obligations under Good Regulatory Practice and Regulatory Cooperation (GRPRC), Technical Barriers to Trade (TBT) and Sanitary and PhytoSanitary (SPS) Chapters of Free Trade Agreements, such as the UK-EU Trade and Cooperation Agreement.
Impact on international trade
Relevant changes to regulation that could affect trade and investment include:
- The ability of Scottish businesses to trade or provide services overseas, or
- The ability of overseas businesses to export to the Scotland or provide services to Scotland
- Foreign investors/companies operating in Scotland being impacted differently from UK-owned companies/investors
- The assets of foreign investors/companies being removed from them or substantially taken out of their control.
The ability of businesses to trade within Scotland would traditionally be captured within Business and Regulatory Impact Assessments (BRIA). However, the ability of overseas businesses to export to Scotland is a new aspect that policy makers will need to consider.
When answering this question, policy makers should consider the following:
Considerations for assessing impacts on international trade
Does this measure have the potential to affect imports or exports of a specific good or service, or groups of goods or services?
Does this measure have the potential to affect trade flows with one or more countries?
Does this measure include different requirements for domestic and foreign businesses?
- i.e. are imported and locally produced goods/services treated equally?
- i.e. are any particular countries disadvantaged compared to others?
If the answer to C is Yes, is the basis for different treatment anything other than it enables foreign businesses to operate on a level playing field in Scotland?
Where you answer yes to any of the above questions, please provide a description and assessment of the rationale, and contact WTO Compliance Enquiries and SGLD to discuss potential notification responsibilities.
Some WTO Agreements and FTAs encourage members to 'base' regulatory measures on relevant international standards, where they exist.
If a relevant international standard (or parts thereof) would support compliance with a measure that achieves a legitimate policy objective, policy makers are encouraged to consider using relevant international standards as a basis for the measure.
Please contact WTO Compliance Enquiries within the Directorate for International Trade and Investment (DITI) for further advice to complete the assessment, for advice on potential notification responsibilities under WTO agreements and for further guidance on identifying international standards.