The UK services sector accounts for nearly 80% of the UK’s GDP and employs 4 in 5 workers across the country. The UK is the world’s second largest exporter of services and the EU is the largest recipient – equivalent to 40% of the UK’s total services exports. Services trade between the UK and EU is underpinned by harmonised rules, but under a no deal many of these rules will fall away and market access to the EU will become restricted for many sectors.
Key challenges for business
In the case of a no deal, how will trading services between the UK to the EU work?
UK services businesses exporting to the EU need to consider a range of changes, including to the rights to establish in the EU, professional qualifications, to the free flow of data and to the movement of people. Some sectors, such as financial service and broadcasting, which are subject to sector-specific rules will also immediately lose the ability to access to the EU market for some of their services from the UK.
For businesses that import services from the EU, there should not be significant immediate changes – except in the case of some financial services. However, this stability may change in the years ahead.
How will UK businesses setting up a presence in the EU be affected?
UK businesses setting up a presence in the EU could face additional restrictions on their ability to provide services, and they could lose preferential rights to establish a presence in the EU under a no deal. New barriers, including minimum numbers of locally resident staff for different roles; restrictions on the number of establishments; and foreign ownership rules, could be placed in front of UK firms on day one of a no deal.
How will no deal impact individuals with professional qualifications?
Different member states will treat individuals with UK-originating professional qualifications differently in the event of no deal. For example, British qualifications will continue to be recognised for UK nationals already working in Spain and in Germany, and for EU citizens who studied in the UK before Brexit. But in France, it will vary by qualification and in many member states it is unclear.
EU citizens who have already had their professional qualifications recognised in the UK by exit day will be fully protected. Applications for recognition which have been made, but not yet received a decision, will be concluded under the same rules as far as possible. The exceptions to this are in law and auditing, where the government has provided a transitional period until December 2020 for EU qualified lawyers and auditors to convert their qualifications to UK ones.
Analysis of preparedness - RAG rating
Key questions for business to consider
Under a no deal, the UK will be treated as a third country and the provisions of service trade will be subject to national regulations in each member state. There are some key questions your firm should answer to ensure you have covered the major issues.
- Will your business face restrictions on your ability to own, manage or direct a company registered in the EU?
- Will you need to comply with new potential nationality or residency rules for senior managers or directors?
- Will your business be subject to new requirements on the amount of equity that can be held by non-EU nationals?
- Have you got the correct authorisations and licenses to continue to provide your services?
- If you provide services to an EU member state, do you comply with that state’s specific business regulations?
- Have you checked what the changes to the ability to send UK employees to service customers in the EU will mean to your business?
- Have you checked whether the qualifications that your employees hold to provide their services will still be valid?
- Have you understood the changes to data flows if the UK leaves the EU with no deal?
Want the highlights? View our webcast
Preparing for no deal: the changes for trading services with the EU
Other resources to help you plan
Services businesses should consult the UK government’s technical notices on providing services by country in the event of no deal.
Read about providing services in each of the EEA nations here.
Check to see if your sector will be impacted by new requirements on how professional qualifications between the UK and EU are recognised in a no deal scenario here, including specific advice for seafarers here, and for architects here and from the Royal Institute of British Architecture here.
Legal services professionals could lose the ability to provide “fly in fly out” services; see how this could affect firms here, and read the specific advice for auditing firms here and specific advice for accounting firms here, as well as advice from the Institute of Chartered Accountants in England and Wales here.
If you operate in aviation and rail, read the government’s advice for your sector here.
If you operate in the energy sector, check the government’s no deal guidance for the energy sector here, which sets out plans for maintaining UK energy legislation in the event the UK leaves the EU without an agreement, or read EnergyUK’s no deal information notes here.
If you operate international bus or coach services and tours, read the government’s advice here.
If you operate in the creative, cultural or sports sector, read the government’s advice here, and if you operate in the broadcasting or screen sectors, read specific advice on broadcasting here and the British Film Institute’s Brexit advice here.
If you operate in telecoms, read the government’s advice here.
If you operate as an independent professional, or are self employed, then you can find useful information on IPSE’s Brexit hub here.
How are other businesses preparing?
— Professional services firm, London and the South East
We’re proud of the fact that our UK workforce is in high demand across the world. We export audit, tax and consultancy services and need an agreement with the EU on mobility, as well as on the mutual recognition of qualifications and equivalence of financial reporting and audit services to function properly. We’re fairly diversified and are pretty ready for no deal in the short-term, but in the long-term it’s likely that we’ll service our EU customers from EU bases more than we do today.