Brexit delivered a staggering £113bn blow to exports of UK services even before the sector was left out of the final trade agreement, new research says.
The £113bn cumulative loss was calculated by projecting how the sector would have grown from 2016 to 2019 if the referendum had not taken place – and it had continued on its previous path.
“What we find raises serious concerns about the damage to the UK’s services trade position and the likely spillovers to the economy and jobs related to the services sectors,” said Jun Du, professor of economics at Aston Business School.
But the figure does not include any data for 2020 – because of the distorting effect of the pandemic – or, crucially, for the impact of the actual deal itself.
Services industries have long protested at being “thrown under the bus” – despite the UK enjoying an £18bn surplus in services trade with the EU, against a deficit of £97bn in goods.â¨
Ms Du warned that a trend of services companies moving away from the UK is likely to accelerate as Covid restrictions are lifted and trade resumes.
“The Covid period created difficulties in moving business and individuals [which] slowed down this relocation process,” she told the Financial Times.
“It will now pick up and get worse as businesses see that there is not much going on in UK-EU negotiations. I think this is only the beginning,”
Since the Christmas Eve deal – which Boris Johnson hailed as “fantastic” – the government has refused to reopen talks on plugging gaps, with a new ‘Partnership Council’ yet to meet.
In March, an inquiry by a House of Lords inquiry raised the alarm over:
* Financial services jobs moving to the continent – after Amsterdam overtook London as Europe's leading share-trading centre.
* The failure to achieve mutual recognition of qualifications – which will have “a serious impact” on architects, accountants and other professionals.
* The loss of visa-free tours by musicians and other artists – which will “make touring prohibitively bureaucratic and expensive”.
* The decision to pull out of the Erasmus+ student exchange scheme – with the replacement Turing scheme failing to “cover the costs” of studying abroad.
Aston’s research found that financial services exports were the hardest hit by the 2016 referendum, as banks, insurers and asset managers moved people and capital from London to EU capitals, to rescue seamless trade.
The other most-affected UK sectors included business services, travel, transport and IT, it concluded.
Ireland’s services exports from 2016 to 2019 boomed by £126bn, but Irish economists have disputed that was a consequence of Brexit.