Developing trade in services
Services are simultaneously the most important sector of the UK economy and the sector facing the biggest challenge as a result of Brexit. The prospective departure from the European Single Market reduces the UK to the status of ‘3rd country’ in respect of services. Accessing the internal market will depend on both subjective and objective conditions that differ from sector to sector, requiring detailed and highly specific arrangements for such industries as aviation and financial services.
In practice, the EU can be expected to use these circumstances to discourage the UK from significantly diverging from European regulatory norms, as a matter of policy. In view of the weakness of, and uncertainty surrounding, international moves to oversee, let alone to further liberalise, trade in services, Brexit will thus leave the UK’s services sector – and especially financial services – uniquely isolated and exposed. The government will hence need to consider carefully the costs of decisions to diverge from EU regulatory standards, and should be giving great priority to establishing clear objectives for close cooperation between the UK and the EU policy makers and regulators.