They make up 80 per cent of UK GDP and 40 per cent of its trade with Europe. But services firms will be left badly exposed by Johnson’s planned free trade agreementby Alex Dean / January 9, 2020 / Leave a comment
Brexit is now a near certainty, but the future trade terms with Europe are all to play for. This is one of the most pressing economic questions the UK faces today. The EU is by far our largest export market and any restriction of access would have a severe impact.
Commentators have shown justified concern that the UK is already setting itself up to fail in negotiations. They worry in particular that the transition period will not provide enough time and that Johnson will pull us off a second cliff edge rather than extend it.
But one specific area that deserves far more attention is services. I asked cabinet ministers, former civil service chiefs and industry experts for their assessments and it is clear that there is a major risk to UK prosperity here in the months ahead. For even if Johnson strikes a deal, it is unlikely to provide adequate terms, thus threatening not just financial services but the services sector as a whole—and the UK’s reputation as a world leader in this field.
There is no disputing the importance of services to the UK economy. Goods, from farming products to manufactured wares like car parts, have received far more attention. But services account for 80 per cent of the UK economy and 40 per cent of its trade with the EU, with financial, legal, engineering and tourism services among those exchanged between firms in the UK and different member states. Currently this trade is governed by the EU single market and agreements around movement of people, recognition of qualifications and common regulation. But when we leave these preferential terms will not be replicated and services firms which trade on the European market will have reduced access. What happens then?
Of course the government, for its part, is positive about the opportunities ahead. Liz Truss, International Trade Secretary, told me that “Having the ability to negotiate new Free Trade Agreements after we leave the EU, while forming a close economic partnership with our European neighbours, will unleash the potential of the sector, creating new opportunities for people and companies across the UK.”
That sounds optimistic. But in other quarters the mood is less buoyant. They fear that services trade could be left badly neglected by…