Yahoo Finance City urges Brexit talks to include 'life blood' of economy
Theresa May’s government is being warned that a Brexit deal that excludes the services sector risks hurting the “life blood” of the economy.
A three page statement on Friday has raised expectations of a “soft Brexit” but sparked the resignation of two ministers – Boris Johnson, foreign minister, and David Davis, Brexit minister.
That statement was issued in an attempt to show Cabinet unity after on the negotiating lines with the EU. It outlined the need for “regulatory flexibility” for the services sector but focused more on a free trade area for “goods”.
The service sector is not traditionally included in free trade agreements but some argue that this need not be the case with Brexit.
May told MPs on Monday that the government would publish a white paper on Thursday setting out the government’s position in detail – and rejected the assertions of Labour MP Chuka Umunna that she was ignoring the services sector.
Ahead of that white paper, a senior figure at the local authority which covers much of the financial district urged clarity for the financial services sector.
Catherine McGuinness, policy chair at the City of London Corporation, said: “It is welcome that the cabinet set out an agreed position for the UK’s future relationship with the European Union following their Chequers summit last Friday. A deal that excludes services, however, could have a negative impact on the UK’s financial sector.”
Services makes up about 80% of the UK’s economic output and employs 4.6 million people.
“Services is truly the lifeblood of the economy. A partnership based on mutual recognition and market access will benefit businesses and households on both sides of the Channel,” she said.
“The competitiveness of the City and the UK will hinge on the type of deal the government can secure with the EU,” said McGuinness.
Friday’s statement referred to “a common rulebook for all goods including agri food” which would involve committing harmonisation with EU rules on goods where it is needed to secure “frictionless trade” at borders.
On services the statement said: “We would strike different arrangements for services, where it is in our interests to have regulatory flexibility, recognising the UK and EU will not have current access to each other’s markets.”
It outlined the need for “regulatory flexibility” for the services sector and the need for arrangements that preserve the benefits of integrated markets but without replicating the current “passporting” regime which allows firms across the EU to operate seamlessly across the trading bloc.
May had already said that passporting was not a possibility for the City, which has since called for a regime of mutual recognition. Speaking to MPs in the house of commons on Monday, May said Thursday’s white paper would include detail about services and said the sector needed more flexibility than the goods sector.
Miles Celic, chief executive of lobby group TheCityUK, said it was reassuring services had been mentioned but that he awaited further detail in the white paper.
