Services 'being ignored' in EU trade talks

There is growing concern among British businesses - particularly in the services sector - that the UK and European Union will fail to reach a free trade deal by the time the Brexit transition period ends on December 31.

David Sapsted

8 June 2020

The fourth round of negotiations between London and Brussels ended last Friday with both sides admitting little progress had been made.It was admission that set alarm bells ringing among UK businesses. Josh Hardie, deputy director-general of the Confederation of British Industry (CBI), described an ambitious deal with the EU as "a cornerstone of the UK’s recovery from the pandemic".But he said progress in the Brexit talks had become worryingly slow, adding: “The stark reality is that most businesses are understandably unprepared for a dramatic change in trading relations with our biggest partner in just six months’ time. With jobs in every region of the UK and EU under pressure, the stakes are higher than ever.“A deal that works for both sides economies is the only way forward. Political leaders should step in urgently, change the dynamic and find solutions that protect people’s livelihoods. Failure to break the deadlock only leaves a choice between an extension that the UK government has already ruled out or, worse, a deeply damaging 'no deal'.”Meanwhile, a report from the think-tank, UK in a Changing Europe, said the services sector, which accounts for more than three-quarters of the nation's GDP and some 30 million jobs, had been largely ignored in the trade talks.The report, 'Services and Brexit', said there were fundamental questions about the economic price the UK government appeared willing to pay in its determination to "take back control" of the regulations shaping the services sector.It pointed out that the sector - including financial, health and education - was highly dependent on EU workers and that, when free movement ends on December 31, staff shortages could arise with the introduction of the government's new, points-base immigration system
Prof Anand Menon, director of UK in a Changing Europe, said: “It is worrying that the biggest sector in the UK economy – accounting for more than 80 per cent of it – has been the subject of so little focus in the UK-EU negotiations.“This serves to underline the largely political nature of the government’s Brexit priorities, focused on regulatory autonomy rather than any economic implications of this.”Last week, Sky News reported that Andrew Bailey, the governor of the Bank of England, warned the leaders of Britain's largest banks and related financial services that they needed to bolster their planning in case the UK failed to secure a post-Brexit trade deal with the EU.The bank said in a statement: “It is fundamental to the Bank of England’s remit that it prepares the UK financial system for all risks that it might face. In performing that role, the governor meets the leadership of UK banks on a very regular basis.“As we have said previously, the possibility that negotiations between the UK and EU over a future trading relationship might not conclude in a deal is one of a number of outcomes that UK banks need to prepare for over the coming months.”In response, Economic Secretary to the Treasury John Glen described the UK’s financial services industry as “world class” and ready for whatever the outcome of talks with Brussels might be.“I continue to believe we are still well placed as a sector, whatever the specific outcomes are of negotiations ahead of us in the second half of this year,” he said.