Brexit and the service industry

Dec 16, 2020

Services such as transport, construction, tourism, and financial services are crucial to the economy and employment in both the EU and the UK.  However, they have not achieved as much prominence in the Brexit debate as trade in goods. What will happen to the fluidity offered by the EU’s Single Market post Brexit?

Around 70 percent of the EU’s GDP is made up of services; for the UK it’s as high as 80 percent. There isn’t time to reach a comprehensive Free Trade Agreement in services and a no-deal Brexit would mean limited release for trade in services under WTO rules.  The problem with services is that future restrictions on service provision will be more based on the local laws and practices in the destination country rather than a blanket EU-wide approach.

Leaving the Single Market will lead to additional barriers to trade and to the cross-border mobility of people, and adjustments will be necessary for both the EU and the UK.

The Single Market for services allows a common regulatory and supervisory environment. The cross-border exchange of services means that where one Member State authorises a business to provide a service based on EU rules, that business can provide that service across the entire EU Single Market.

This is due to standards, technical rules, regulatory and supervisory frameworks being harmonised. Passporting principles, for example, underpin the free movement of financial services between EU countries.

Come 1 January 2021, the freedom to establish and provide services will no longer be available to UK businesses and individuals wishing to continue to operate in the EU, or EU businesses and individuals operating in the UK. This has particular relevance for mutual recognition of qualifications, legal services, data flows and intellectual property.

Authorisations granted by UK authorities under the EU Single Market rules won’t be valid come 1 January 2021.  This has particular impact for financial services, transport, energy and audio-visual media services.

UK-established businesses and individuals wishing to access the EU market for services will need to comply with the rules and procedures set down by both the EU and national authorities for foreign national businesses or individuals. These requirements will be set out in EU law or more commonly in national law. However, they will be formed based on the World Trade Organisation General Agreement on Trade in Services and the General Procurement Agreement (GPA), and also within the future relationship that is agreed with the UK. 

EU service providers will also have to comply with any relevant UK law in this area.

More information

Take a look at our infographic depicting things that you might consider doing to prepare for these changes.

The Irish government has provided information on Trade in Services after Brexit as part of their Brexit Readiness Action Plan.

The House of Commons library has prepared a paper on Trade in Services and Brexit.