What’s the Real Deal with UK Services After Brexit?
The services sector isn’t just another slice of the UK economy – it’s the whole pie, making up roughly 80 per cent of our GDP. Yet, recent research from the London School of Economics is painting a somber picture for the export side of things.
Sudden Decline in EU Market Share
- 16% drop in services exports to EU markets that have been hit hard by Brexit‑related trade barriers.
- Consistent with what UK businesses are calling on the ground – they’re feeling the pinch.
Why the TCA Is a Roadblock
Before the Trade and Cooperation Agreement (TCA) kicked in back in 2021, our legal, finance, and consultancy firms were practically on the same page as their EU counterparts. They had strong cross‑border ties and a healthy stream of revenue flowing across the Channel.
With the TCA, a whole new set of hurdles appeared:
- Mandatory licensing and residency rules.
- And the big one – the lack of mutual recognition of professional qualifications.
Almost half of the firms that export services now point to these red‑tape and market‑access snarls as the main reason they’re losing EU clients. The problem is real: many lament that navigating the new regulatory maze has become a lost cause.
One‑Third of Services Still Earn Max
Fortunately, not all service exports are doomed. About 70 % of UK services exports to the EU fall under World Trade Organization Mode 1 – meaning, yes, you can still do much of your work online! Think legal opinions, accountancy, architectural plans – all delivered electronically without the usual “ho ho” constraints.
Only roughly 30 % hit by stricter TCA limits. Those firms face restrictions on short‑stay visits, making it harder to showcase services face‑to‑face, even when the product itself can be delivered digitally.
Bottom Line: Our To‑Do List
- Push for mutual recognition of qualifications – it feels like the missing teeny‑tiny piece of a huge puzzle.
- Amplify digital channels – the Mode 1 play isn’t a throw‑away, it’s a launchpad.
- Lobby until the TCA more closely mirrors the old, smoother framework that made these services international stars in the first place.
Services are the backbone of the UK economy – let’s make sure the backbone doesn’t wobble.
Evidence from LSE Study
Unmasking Post‑Brexit “Hidden” Barriers to UK Services
When the Centre for Economic Performance at LSE drops its latest discussion paper, “Deglobalisation in disguise? Brexit barriers and trade in services”, the headline flavor is clear: the TCA has turned the trading of services into a game of dodging invisible hurdles.
What the researchers did (in plain English)
- They combed through 713 service categories across 27 EU member states to spot the sneaky regulatory pain points.
- Key culprits identified were: licensing restrictions, residency rules, and the absence of automatic qualification recognition.
- They then matched this treasure‑map of barriers to real‑world trade statistics, so they could see exactly how each hiccup knocked on the UK service door.
The “big red flag” findings
- UK services that hit these red‑flagged regulatory zones have seen a 15.8% slowdown in exports to the EU, compared to other sectors that didn’t face such hurdles.
- Altogether, the UK is shipping 4–5% less services into Europe than the numbers would have shown if the Brexit exit had been smoother.
- The hope that trading freely with the rest of the world would make up for the loss just doesn’t hold up: those extra non‑EU markets didn’t fill the gap.
High‑value sectors are the real casualties
When you think of the UK’s “lion‑hearted” repeat offenders, it’s the legal, financial, and tech services that flag up fastest. These are the areas where the UK used to enjoy bragging rights, but the new rules have made everyday operations a maze.
Bottom line
In sum, the TCA’s seemingly “small” regulatory tweaks have had a substantial, negative spill‑over on UK service exports to the EU. If we want to be sure the UK can truly ride the global wave, we’ll need to crack those barriers wide open.
What UK Businesses are saying?
Export Hurdles: The Human Side of BCC Findings
According to BCC data, it’s not just the paperwork that’s killing the export game—there’s a whole circus of paperwork, bureaucracy and a few policy hiccups that make SMEs feel like they’re stuck in a never‑ending maze.
Top‑Tier Roadblocks
- Customs procedures – 45% of the surveyed businesses frown upon these steps as the biggest barrier.
- Export documentation – 39% say that the paperwork required keeps them up at night.
Take a Manchester company, for example. They’re on the verge of losing a handful of EU clients because fresh licensing rules shout, “No cross‑border services allowed – sorry, you’re out of luck!”
New‑Age Congestion & Cross‑Border Talent
A Bristol firm echoed similar frustrations, complaining that hiring EU talent has become a pot‑of‑coffee without a direct coffee machine—visa glitches and a lack of mutual recognition on qualifications slow everything down.
What SMEs Want
- Simplify trade regulations and open up EU market access.
- Push for a return to the Single Market or better TCA terms.
- Make it easier to move people between the UK and the EU (46% of respondents are shouting “yes!” at the prospect). Their hope? Straight‑forward negotiations that let workers and businesses glide in and out of the EU like a well‑oiled piece of machinery.
What’s Next for UK Services Trade?
Rebuilding the UK’s Global Services Trade Edge
Picture this: the UK, fresh out of the EU bubble, is staring at the global services market like it’s a massive buffet. The crack? The pinch‑point is clear – keep a good feel on the market, flex up the rules, and remember that the digital trade waiver is no longer a VIP pass. If we’re to taste the Prime Minister’s ambition, we need a recipe: regulatory alignment, deep economic integration, and a one‑stop shop for SMEs.
Why We’re Losing Wings… and How We Can Fly Again
- Regulatory Chases – The EU’s single market used to let digital services glide without friction. Now a new trade deal tastes like coffee – good on long‑term but won’t replace those instant, frictionless rails.
- WTO Digital Duty Waiver – Think of it as the “no‐tariffs” rule for e‑transmissions. 70 % of UK to EU services exports move electronically; a sudden tariff could be a nightmare for tech firms and customers alike.
- Fast‑Track Delivery – The UK Trade Strategy, launched at the BCC Global Annual Conference, can support this dream, but only if it gets rolling quickly and sticks to real, actionable steps.
SME Support – The Heartbeat of the Economy
SMEs are like tiny gymnasts—one false step can throw them out of the ring. The UK needs real‑time evidence to show how trade barriers affect their day‑to‑day grind:
- Clear Lab Test Questions: how many delays, what costs, and what benefits are we seeing?
- Data‑Driven Policies: that way we can bet whether the new rules are actually helping or just adding more paperwork.
What BCC is Saying (and What We Can Do With It)
- Keep
the WTO’s digital waiver – no that’s not a meme, it’s a lifeline.
- Relax short‑stay visit rules for marketing and promotion – the world is a smaller place once you’re allowed to pop in.
- Open the door to recognise professional qualifications between the UK and EU – treat a UK accountant the same as one from Berlin.
- Sharpen secondments, intra‑company transfers, and youth mobility schemes – give your talent the chance to hop over the Channel.
Latest LSE Study – The Compass We Need
The LSE paper is like a GPS for the UK. It points out where we’re bumping into obstacles and tells us why a more strategic, evidence‑led approach is key. Think of it as the roadmap for turning the UK back into a global services powerhouse.
So, let’s get moving, keep the digital doors open, and make sure the UK’s services story is one of momentum, not a stalled ride. And for the love of progress, let’s get that real‑time data in the shop before the next trader tosses an idea at us. Cheers!
