Needs of UK’s vital professional business services overlooked in trade negotiations, says Lords EU committee report

The professional and business services sector is vital to the UK’s economy, adding an estimated £224.8 billion to the UK economy and providing some 4.6 million jobs. This sector includes advertising, legal services, market research, accountancy, audit, architecture, engineering, PR and management consulting.

Most professional and business services companies in the UK are small operators and two-thirds are based outside of London and the south east. These companies are also of significant importance to Northern Ireland, Scotland and Wales.

Future UK-EU arrangements on trade in services will have a big impact on this sector, particularly smaller operators. This inquiry has shown that the needs of this hugely important sector have been overlooked by the Government during negotiations.

These are some of the findings and conclusions of a new report, The future UK‐EU relationship on professional and business services, published today by the House of Lords EU Services Sub-Committee.

Commenting on the report, the Committee’s Chair Baroness Donaghy, said:

“Professional business services are a vital part of the UK’s economy, more than four and a half million jobs depend on this sector and it contributes almost £225 billion to our economy.

“This sector, and the people who depend on it for their livelihoods, will suffer if its needs are not reflected in the UK’s negotiations with the EU. We are concerned that they have been overlooked in the negotiations so far.

“A free trade agreement on services is no silver bullet, but there are a number of areas that both sides need to get right to limit potential barriers to trade. It essential that issues such as EU Member State national reservations to the agreement, the mutual recognition of professional qualifications and business mobility are dealt with properly in a future UK-EU agreement. These barriers to trade must be prevented.

“Despite being so close to the end of the transition period, many businesses, especially SMEs, are not well prepared, not least because they are not sure what to prepare for.”

Other findings and conclusions from the report include:

• Professional and business services provided £225 billion gross value added to the UK economy in 2019 and employed 13% of the UK workforce. It is the UK's leading services export, valued at £96 billion, which is over three times the value of the UK's leading goods export, cars. The EU is the largest market, amounting to 37% of the UK’s professional and business services exports (£35 billion).
• Professional and business services are closely linked to the financial services sector and the creative industries, both of which face some of the same vulnerabilities and threats raised in this report.
• National reservations to the agreement such as economic needs tests and rules on local presence could be catastrophic for the UK's professional and business services sectors.
• The sector relies on professionals being able to travel between the UK and EU to deliver their services at short notice. The Committee urges the Government to ensure that temporary business mobility is covered by an agreement with the EU, and that arrangements on the duration and nature of permitted business travel are comprehensive.
• The mutual recognition of professional qualifications is one area where a bad deal could be worse than no deal. The Committee supports the UK's position that mutual recognition should be the default position as professionals won’t be able to deliver their services if their qualifications are not recognised.
• A UK-EU agreement must protect the existing UK intellectual property framework and provide effective enforcement of intellectual property rights for the UK's creative and intellectual property rich sectors.
• The Committee is alarmed about the lack of an EU decision on the data adequacy of the UK framework and the absence of most decisions on financial services equivalence and audit adequacy. The Government must push for these assessments to be concluded as soon as possible, to give businesses in the UK and EU legal certainty and time to prepare.