UK services sector to feel Brexit heat
london — A decade ago, Fraser Bell set up his Northern Star technology company in London. After the Brexit vote, he’s not sure he’d do it again.
“Until politicians can stop politicking and just get on with it, I wouldn’t make a major investment in London,” says Bell, 51, who now employs 20 people. “Because you’re never going to be sure of the return.”
So far, much of the debate around Brexit has focused on the impact on manufacturers operating in the UK such as Nissan Motor Co. Yet, service providers like bankers, lawyers and technology firms now account for about 80 per cent of the economy and are also starting to fear the worst as tension between the UK and the European Union mounts. Inside the EU, they can sell across world’s largest trading bloc, mostly without significant barriers. Outside, they could face hurdles.
“Architects, lawyers, accountants, those more regulation-intensive sectors, they really do profit a lot from the European single market in services,” said Ingo Borchert, an economist at the UK Trade Policy Observatory. Striking a free-trade agreement for services with the EU will be “monstrously complicated” given the short time period.
Britain is the globe’s second-largest exporter of services after the United States. In 2016, total service exports amounted to almost £250 billion ($322 billion), compared with £300 billion of goods. Outside the EU, services firms could face restrictions such as limits on taking stakes in European companies, and controls on access to some sectors, according to London First, a group that campaigned against Brexit.
Already, banks operating in London such as JPMorgan Chase & Co are scoping out other bases in the EU, and other sectors are also keen to remain inside the EU.
Last week, cybersecurity company Tenable Network Security opened its new international headquarters in Dublin, on the banks of the River Liffey. Tenable employs about 35 people in both Dublin and London, but chose the Irish capital to expand. It now plans to add more than 70 people in Ireland over the next two years.
“The decision was already in process before the Brexit vote but certainly it reinforces our decision,” Amit Yoran, Tenable chairman, said. UK Prime Minister Theresa May is aiming to strike a wide-ranging freetrade accord with the EU that provides similar access to the current arrangements. For some sectors, like air transport, though, there’s no detailed precedents to draw on, and if the FTA fails, services fall back on World Trading Organisation terms.