Brexit: Expert discusses ‘importance’ of UK financial services
Professor David Blake has said with Brexit now in the rear-view mirror, it was therefore imperative for the Government to keep up the pressure when it comes to securing a good deal for financial services. With much of the focus of UK negotiator Lord David Frost and EU opposite number Michel Barnier centring on the so-called level playing field, identifying a method of dispute resolution acceptable to both sides, and fishing access, a deal on financial services has yet to be struck.
Prof Blake, Professor of Economics at City, University of London, said in order to redress the balance, it was important for the UK to negotiate a system guaranteeing its pre-Brexit access to the EU.
In order to achieve this though, Brussels will need to be persuaded to grant what is known as regulatory equivalence – but will only do so if sufficiently convinced that the UK will stay closely aligned to its rules when it comes to financial services.
Prof Blake told Express.co.uk: “The UK-EU agreement has baked in the EU’s (and especially Germany’s) trade surplus with the UK.
Boris Johnson must secure a deal from Ursula von der Leyen on financial services, said Prof Blake
Michel Barnier, the EU’s Chief Negotiator
“Giving tariff-free and quota-free access to the UK’s single market (when combined with the undervalued euro) is far more beneficial to the EU than giving the UK tariff-free and quota-free access to the EU’s single market.”
He explained: “This is because the EU sells mainly high-value goods (which would otherwise attract a high tariff) to us and we sell mostly low-value (and otherwise low-tariff) goods to the EU.”
A recent study published by the Civitas think tank indicated that without the trade deal unveiled by Mr Johnson on Christmas Eve, UK exporters to the EU would have faced £5bn in tariffs on goods sold to the EU, but EU exporters to the UK would have had to pay £13bn in tariffs on goods entering the UK.
Boris Johnson is facing a fresh challenge in terms of financial services
What is astonishing is that, knowing this, our negotiators did not extract any deal on services where we have a comparative advantage
Prof Blake added: “German exporters (mostly in cars) alone would have to pay £3.4bn in tariffs, whereas UK exporters to Germany would face only £0.9bn in tariffs.
“No wonder Angela Merkel was under such pressure from her car manufacturers to agree a deal.
“What is astonishing is that, knowing this, our negotiators did not extract any deal on services where we have a comparative advantage and a substantial £20bn trade surplus with the EU.”
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Lord David Frost, the UK’s Brexit negotiator
Angela Merkel, Germany’s Chancellor
Prof Blake also referred to a briefing paper published by the House of Commons Library.
This indicates that in 2019, the UK’s single largest service export to the EU was “other business services”, valued at £41 billion, representing 33 percent of all UK service exports to the EU.
The category includes legal, accounting, advertising, research and development, architectural, engineering and other professional and technical services.
Job losses which would have resulted in the EU27 in the event of a hard Brexit
Ireland was the UK’s biggest EU export market for other business services in 2019, accounting for 28 percent of the total.
Germany was second, on 15 percent.
As a whole, the EU accounted for 37 percent of UK exports of other business services, making it the UK’s largest export market in terms of this.
City of London: One of the world’s foremost financial centres
However, in terms of individual countries, the US was the UK’s largest export market for other business services, accounting for 30 percent of total exports, followed by Ireland on 10 percent.
Meanwhile financial services are valued at £26 billion (21 percent of service exports to the EU).
Combined with other business services, the two categories made up more than half of all UK service exports to the EU (54 percent).