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Capital’s service sectors to bear
devastating brunt of Brexit
downturn
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Sadiq urges the
Government to improve on EU trade deal for service
sector
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Financial and professional services severely
hit
Brexit will potentially cost London’s economy £9.5bn a year –
with the capital’s service sectors bearing the brunt of the
downturn, stark new research published by the Mayor of London,
, reveals
today.
The Brexit trade deal that came into force on January 1 ensured
that goods travelling between the UK and European Union will not
face tariffs or quotas.
British businesses in the services sectors however now face major
barriers to doing business in the European Single Market and have
to comply with varying rules across member states, together with
additional red tape.
Services industries – which include financial and professional
services, law, creative, technology and hospitality sectors -
contribute 80 per cent to the UK’s economy. London, meanwhile,
accounts for 40 per cent of the UK’s exports in services.
Today, the Mayor has published an analysis of the Government’s
Brexit trade deal from a London perspective by the Centre for
Economics and Business Research (CEBR).
The analysis sets out the initial effects on London’s economy of
the reduction in trade with the EU as a result of the Brexit
agreement and shows a potential annual loss of £9.5bn of Gross
Domestic Product (GDP). London’s financial and professional
services sector alone is set to account for more than £2bn in
lost GDP per year.
However, the findings also make clear the economic costs could be
even higher if the Government fails to reach separate agreements
with the EU to close the gaps in the trade deal for the UK’s
financial and professional services firms.
The Mayor is particularly concerned about the Government’s
failure to secure a wider raft of agreements on regulatory
equivalence, which would allow UK financial sector firms to
continue providing specific products and services to clients in
the EU. As a result, the UK financial sector currently benefits
from fewer equivalence decisions than its counterparts in the
USA, Japan and other major trading centres.
The Mayor has published the report ahead of a meeting with
businesses and organisations from London’s financial services
sector tomorrow, where he will hear more about the challenges to
trading in the post-Brexit world.
The Mayor of London, , said:
“London is a world leader in finance, law, professional services,
the creative industries and technology.
“However, whichever way you slice it, the Government’s Brexit
trade deal was the equivalent of a ‘no deal’ Brexit for financial
and professional services, and our businesses now face a costly
red tape mountain caused by the UK having to trade with the EU as
a ‘third country’.
“For the good of London and the UK’s economy, the Government
should have been focussed on getting a deal that protected these
industries – and this report reveals the staggering losses that
London could face as a result of the trade agreement. These
losses could be even higher if the Government fails to secure
additional agreements with the EU on hugely important areas of
regulatory equivalence.
“The service sector is absolutely crucial to serving the wider
economy – contributing billions in tax revenues to the Treasury
every year, which goes towards funding public services in every
village, town and city across the country. That’s why it is vital
that the Government quickly closes the gaps in the trade deal for
key sectors of our economy.”
The Mayor has called tomorrow’s meeting to help him understand
what can be done by the Government to mitigate the impact of the
trade deal on London’s economy and the services sector
post-Brexit.
The financial services sector is worth £135bn a year in 2017 to
the UK and supports over one million jobs. Fewer than four in ten
jobs in financial services are in Greater London. Nearly 100,000
jobs are in the north-west, and 75,000 are in the Yorkshire and
Humber region.
The Mayor also believes the Government must urgently work to
close other gaps in the trade deal for London’s predominantly
service-based economy on issues such as data adequacy,
recognition of professional qualifications and the mobility of
business people. He has also called for the Government to secure
a workable solution from the EU to the post-Brexit barriers
facing UK and EU artists and cultural professionals reliant on
international touring.
NOTES TO EDITORS:
The report is available at https://www.london.gov.uk/sites/default/files/brexit_deal_analysis_2021_-_04.02.pdf
