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Looming Brexit Catastrophe for Booming UK Services Sector, Warns Lords Report

One of the UK’s best exports is at risk of being sabotaged through Brexit negotiations, peers claim

Carpeting in the colours of the EU flag can be seen in the Konrad Adenauer House in Germany. Photo: Michael Kappeler/dpa

Looming Brexit Catastrophe for Booming UK Services Sector, Warns Lords Report

One of the UK’s best exports is at risk of being sabotaged through Brexit negotiations, peers claim

The UK’s booming trade in professional services with the EU will face “catastrophic” consequences if negotiators cannot come to an agreement for Europe-wide mutual recognition of qualifications, residency requirements and mobility for UK citizens, a House of Lords report warns today.

Unlike other areas of trade, the UK has a £12 billion surplus with the EU in the professional services sector. This includes fields like law, accountancy, architecture, and the creative industry. The UK’s annual worldwide exports in this field amount to £95 billion; three times the size of car exports.

Peers are particularly concerned that specific problems facing this sector are currently being overlooked by Government ministers. Indeed, it is feared that the UK could be forced to negotiate access to services with each EU member state, a hugely complicated task as each currently insists on different rules.

“We are deeply concerned about the potential for any national reservations to the agreement to undermine services trade liberalisation by imposing restrictions at the national level,” the peers say.

“We have received evidence that national reservations to the agreement such as economic needs tests and rules on local presence could be catastrophic for the UK’s professional and business services sectors.”

For example, problems could easily arise in relation to residency requirements. Austria, France, Germany and Ireland all have rules stipulating that third-country lawyers must have a commercial presence or residency in order to practice. Meanwhile, Denmark, Portugal, Slovenia and Cyprus require residency from third-country estate agents in order to do business there.

In fact, some EU institutions have already signalled to the UK that business is over after 31 December, the end of the Brexit transition period.

“The University of Roehampton and University of Derby accredit degrees taught at the EU Business School in Munich, Bavaria,” the report notes. “In a letter dated 30 November 2019, the Bavarian State Ministry for Education, Science, Culture and Arts (Germany) stated that… when EU legislation no longer applies, the Bavarian State Ministry intends to revoke the decision declaring that the British universities are entitled to carry out study programmes in Bavaria as one of the requirements of the decision is no longer met.”

The changes could also affect British ownership of and investments in European companies. Domestic lawyers in France, Spain and Sweden are prohibited from partnering with peers from third-countries. And, under Danish law, 90% of the shares of a law firm must be owned by those with a Danish licence, or from another EU or EEA country.

Peers are also alarmed about the lack of an EU decision on the UK’s data framework, and the absence of most decisions on the compatibility of financial services and auditing. “The Government must push for these assessments to be concluded as soon as possible, to give businesses in the UK and EU legal certainty and time to prepare,” the report urges.

“Professional business services are a vital part of the UK’s economy,” says Baroness Donaghy, chair of the House of Lords EU Services Sub-Committee.

“This sector, and the people who depend on it for their livelihoods, will suffer if its needs are not reflected in the UK’s negotiations with the EU. We are concerned that they have been overlooked in the negotiations so far.”

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