UK services are not to benefit in Brexit Deal
13 January 2020
Even though services make up to 80% of UK GDP and 40% of its trade with Europe, Johnson's planned free trade agreement will leave UK services unprotected going forward.
Experts in the industry are showing concern for the lack of time the Prime Minister will have to address this in negotiations. The UK is currently a world leader in service providing and there are worries that this title could be lost depending on how discussions in Brussels go.
Nick Macpherson, formerly head of the Treasury for ten years, concurred that Brexit’s net impact on services trade “can only be negative.” Any agreement with Europe which excludes them “could do a lot of damage” because “the UK exports more in services to Ireland than to China, India, Brazil, Japan and Australia put together.”
The issue stems from the fact that free trade agreements that protect services is near-unprecedented beyond the EU single market, they focus primarily on goods, removal of tariffs and quotas. Without previous experience from other nations, it seems that the UK has followed in the same footsteps and not focused on the impact the trade deal will have on UK services.
For Philip Rycroft, former head of the Brexit department, “There is precisely 0 per cent chance that the UK will get as good a deal on services as it has now.”
Rycroft said “most existing trade deals are relatively light on services, so the precedents for a good UK-EU trade deal in services are weak… UK service businesses will have to get used to the prospect of trading on worse terms” with firms in the single market.
To make the matter a little more bleak, it appears the impact on services will be suffered mostly by smaller businesses. As Macpherson explained, “bigger companies should be able to find a way round Brexit by creating subsidiaries within the EU: indeed, most already have.” Henig added “smaller companies that rely on travelling to provide services in the EU are more likely to be affected (think perhaps small IT services suppliers or travel companies).”
So why hasn't this issue been addressed and resolved? One school of thought is that a positive trade deal for services would mean that the UK would have to reciprocate on the deal and allow for full single market membership as well as the free movement of people, this conflicts Johnson's plan going forward.
The coming months will be critical in the discussions that will tie future UK services to the EU.