THREAD ON THE IMPACT OF THIS BREXIT DEAL ON SERVICE EXPORTS💸🏦✉️🧳
Boris Johnson in BBC interview on Wednesday said: “There are already immense barriers to UK services – there is no internal market for services in the EU”....1/
Boris Johnson in BBC interview on Wednesday said: “There are already immense barriers to UK services – there is no internal market for services in the EU”....1/
https://twitter.com/i/status/1344322759988555777
The message the PM seems to be pushing is that the failure to get much on services in this UK-EU trade deal is no big deal.
Here’s why that’s grossly misleading and it IS a big deal economically...2/
Here’s why that’s grossly misleading and it IS a big deal economically...2/
First the data.
In 2019 the UK exported services with a value of around £127bn to the EU.
That's equivalent to around 6% of our GDP...3/
In 2019 the UK exported services with a value of around £127bn to the EU.
That's equivalent to around 6% of our GDP...3/
Moreover, the relative value of services exports to the EU in our exports mix has been rising.
At the turn of the millennium UK services exports to the EU accounted for 25 per cent of total exports.
Last year they were worth 42 per cent of the total....4/
At the turn of the millennium UK services exports to the EU accounted for 25 per cent of total exports.
Last year they were worth 42 per cent of the total....4/
This deal is bad news for services exporters.
See the excellent work of @SallyJJonesEY and @GeorgeMRiddell for more on the detail.
And this @instituteforgov podcast is extremely useful…5/ player.acast.com/ifg-live-discu…
See the excellent work of @SallyJJonesEY and @GeorgeMRiddell for more on the detail.
And this @instituteforgov podcast is extremely useful…5/ player.acast.com/ifg-live-discu…
But what about the macroeconomic impact of this damage to UK services exporters?
The modelling done by various groups in recent years on the likely impact of a basic free trade deal with the EU gives us some decent pointers....6/
The modelling done by various groups in recent years on the likely impact of a basic free trade deal with the EU gives us some decent pointers....6/
The government’s own economists in 2018 pencilled in a 4-14% increase in service firms’ exports costs from new non-tariff barriers.
For financial firms they projected an increase in costs of up to 22% from the loss of the single market passport...7/
assets.publishing.service.gov.uk/government/upl…
For financial firms they projected an increase in costs of up to 22% from the loss of the single market passport...7/
assets.publishing.service.gov.uk/government/upl…
Average estimate of long-term hit to UK GDP from a free trade deal relative to staying in the EU from is around 4%.
Not clear precisely how much of this attributable to lower UK-EU services, as opposed to goods, trade but it would be a considerable chunk given trade trends...8/
Not clear precisely how much of this attributable to lower UK-EU services, as opposed to goods, trade but it would be a considerable chunk given trade trends...8/
The 2018 UK government study attributed ALL the negative impact of the free trade deal relative to staying in the EU to new non-tariff barriers.
It’s notable the damage from this source is almost as great in a free trade agreement scenario as in the no-deal scenario...9/
It’s notable the damage from this source is almost as great in a free trade agreement scenario as in the no-deal scenario...9/
This, of course, will include the non-tariff barriers affecting goods exporters (border checks etc)
Yet also worth noting that the goods/services division is increasingly blurred as exporting manufacturers now earn a ⬆️share of profits from linked services....10/
Yet also worth noting that the goods/services division is increasingly blurred as exporting manufacturers now earn a ⬆️share of profits from linked services....10/
Upshot?
Despite what the PM says, there IS an internal market in services in the EU.
Losing access to it DOES matter for exporting UK services firms.
And the economic impact is going to be negative and will likely grow increasingly large over time.
ENDS
Despite what the PM says, there IS an internal market in services in the EU.
Losing access to it DOES matter for exporting UK services firms.
And the economic impact is going to be negative and will likely grow increasingly large over time.
ENDS
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