Warning services trade could face big Brexit hit

Around half of all international service industry trade coming into and out of Somerset could be hit by Brexit.

According to the latest Government figures, 43 per cent of all service exports leaving the UK from the area in 2018 went to countries within the EU.

Meanwhile, more than half of all services imported into Somerset (56 per cent) from outside the UK that year came from the EU.

The value of those EU exports came to £311 million, while EU imports were valued at £270m.

The figures show that Somerset is more reliant than the UK as a whole on the EU when it comes to service imports and exports.

Of the services imported into the UK from abroad in 2018, 49 per cent came from the EU, while 41 per cent of international service exports went the other way.

These new figures come as tensions mount over negotiations with the EU over a trade deal.

Currently there are no tariffs on trade between Britain and Europe during the “transition period”, after Britain formally left the EU on January 31.

But that ends on December 31.

If a trade agreement is not reached by that time – and fears are growing over the likelihood of a “no deal” Brexit – then Britain would automatically drop out of the Single Market and the Customs Union.

Instead British firms would be subject to World Trade Organisation rules.

That means barriers could be put in place which makes it harder to trade services between Britain and the EU, and could possibly mean delays and rising costs.

The UK could then apply reciprocal barriers on European services imported into Britain.

Professor Sarah Hall, senior fellow at UK In A Changing Europe which promotes independent research and analysis of Britain’s changing relationship with the EU, said: “The figures aren’t surprising in that we know the UK is a services-led economy, but they do show the risks if the services trade faces disruption at the end of the transition period.

“The EU’S Single Market enables greater cross-border services trade than is typical of free trade agreements. In particular it allows services to sell into the EU from the UK and it makes it easier for business travel between the UK and the EU to take place.

“At the end of the transition period, services will be traded between the UK and the EU either on the basis of a new free trade agreement or without one.

“However, the difference between these outcomes is more limited for services as compared with goods because of the more limited ways free trade agreements typically ease cross-border services trade.

“Without a trade deal, UK companies would face significant new barriers to doing business in the EU from having potentially too few HGV permits, to losing passporting rights for financial services that allow UK based financial services first access to the EU.

“Access to EU markets for UK services will necessarily be reduced and more precarious with or without a deal. In financial services, for example, access all depends on equivalence decisions that have not yet been agreed and can be withdrawn with only 30 days’ notice.”

A Government spokesperson said: “We remain committed to working hard to reach agreement by the middle of October, as the Prime Minister set out earlier this week.

“We have engaged in discussions in all areas including in the trade in goods and services throughout negotiations, and we have agreed to meet in Brussels next week to continue discussions.

“At the same time, we are engaging extensively with businesses who trade with the EU about how they can prepare for changes to trade at the end of the transition period.”

❝ Figures show the risks if the services trade faces disruption at the end of the transition period. Professor Sarah Hall