Business services now UK’s largest export sector
Published: 01:08 PM,Aug 06,2024 | EDITED : 05:08 PM,Aug 06,2024
The business prowess of firms in the financial district of London (known as “The City’) has helped power the UK’s strength in services since Brexit, a new report shows, but overall trade has still taken a hit. According to the report, UK in a Changing Europe (UKICE), services trade has been more resilient than almost all other advanced economies since Brexit.
Imports of services have increased 42 per cent in nominal current price terms since February 2020, while exports of services have increased nearly 29 per cent. The boom in services trade has been driven buy ‘other business services’, which include accountancy, management consultancy and legal services.
Unlike finance, these services are less reliant on EU membership and so Brexit has imposed fewer costs. Business services are generally less heavily regulated than financial services and so the barriers to exchange are often lower. ‘Other business services’ has now overtaken machinery and transport to be the UK’s largest export sector..
Goods trade, however, has performed much worse since leaving the EU. In particular, chemicals and fuel trade has been on a steady downward trend as a share of GDP since the early 2010s. The report noted that UK trade with the EU has been more resilient after Brexit than many forecasts suggested, - but still suggested the UK’s departure has had a meaningful impact.
It said that if the UK’s exports to the EU had grown at the same rate as intra-EU trade, EU exports would be 27 per cent higher in August 2023. Trade with the EU in areas which are more tightly regulated – such as finance and transport – has also been weak, the report said.
The report pointed out that the global economic environment is less open to trade than it was when the UK left the EU. Both the EU and the US have increasingly made trade decisions based on their security interests, such as through the Inflation Reduction Act and the EU’s green industrial strategy.
“The dilemma for the UK is that it has to reorganise this when negotiating its trading relationship with them,” the report said. Stephen Hunsaker, a researcher at UKICE commented: “The landscape of UK trade has irreversibly changed and the UK continues to become a service-oriented economy. Brexit looks to have only exacerbated that shift.
“The ever-changing geopolitical environment makes it clear that the UK cannot rely on previous ideas of ‘Brexit freedoms’, like new free trade agreements, as the end-all-be-all”, he added.
UK firms are betting on growth in the coming months after activity across the private sector showed its “firmest outturn” in nearly two years, a closely watched survey has revealed.
According top the Confederation of British Industry (CBI’s) composite growth indicator, which surveys some 680 businesses, activity across the private sector “stabilised” with growth of two per cent in the three months to June, compared to a contraction of 14 per cent during the first quarter.
The uptick was driven by a steadying of the services sector, which dipped one per cent in May after a sharp 21 per cent fall the previous month, according to the CBI. While firms have been tempering their expectations for growth this year, bosses are still pricing in expansion in a sign that sentiment is shifting among UK businesses, the CBI said.
“That expectations for growth remain positive should give further reassurance that things are heading in the right direction,” said Alpesh Paleja, lead economist at the CBI. “But the recovery remains in the early stages, and firms in some sectors – particularly consumer-facing ones – continue to struggle.” Companies across Britain are now gearing up for “modest but broad-based growth”, with activity expected to rise across distribution, manufacturing and services firms, the CBI found. The business and professional services sectors were the main drivers of activity with firms reporting a four per cent bump in activity. (The writer is our foreign correspondent based in the UK)
Andy Jalil
The author is our foreign correspondent based in the UK
Imports of services have increased 42 per cent in nominal current price terms since February 2020, while exports of services have increased nearly 29 per cent. The boom in services trade has been driven buy ‘other business services’, which include accountancy, management consultancy and legal services.
Unlike finance, these services are less reliant on EU membership and so Brexit has imposed fewer costs. Business services are generally less heavily regulated than financial services and so the barriers to exchange are often lower. ‘Other business services’ has now overtaken machinery and transport to be the UK’s largest export sector..
Goods trade, however, has performed much worse since leaving the EU. In particular, chemicals and fuel trade has been on a steady downward trend as a share of GDP since the early 2010s. The report noted that UK trade with the EU has been more resilient after Brexit than many forecasts suggested, - but still suggested the UK’s departure has had a meaningful impact.
It said that if the UK’s exports to the EU had grown at the same rate as intra-EU trade, EU exports would be 27 per cent higher in August 2023. Trade with the EU in areas which are more tightly regulated – such as finance and transport – has also been weak, the report said.
The report pointed out that the global economic environment is less open to trade than it was when the UK left the EU. Both the EU and the US have increasingly made trade decisions based on their security interests, such as through the Inflation Reduction Act and the EU’s green industrial strategy.
“The dilemma for the UK is that it has to reorganise this when negotiating its trading relationship with them,” the report said. Stephen Hunsaker, a researcher at UKICE commented: “The landscape of UK trade has irreversibly changed and the UK continues to become a service-oriented economy. Brexit looks to have only exacerbated that shift.
“The ever-changing geopolitical environment makes it clear that the UK cannot rely on previous ideas of ‘Brexit freedoms’, like new free trade agreements, as the end-all-be-all”, he added.
UK firms are betting on growth in the coming months after activity across the private sector showed its “firmest outturn” in nearly two years, a closely watched survey has revealed.
According top the Confederation of British Industry (CBI’s) composite growth indicator, which surveys some 680 businesses, activity across the private sector “stabilised” with growth of two per cent in the three months to June, compared to a contraction of 14 per cent during the first quarter.
The uptick was driven by a steadying of the services sector, which dipped one per cent in May after a sharp 21 per cent fall the previous month, according to the CBI. While firms have been tempering their expectations for growth this year, bosses are still pricing in expansion in a sign that sentiment is shifting among UK businesses, the CBI said.
“That expectations for growth remain positive should give further reassurance that things are heading in the right direction,” said Alpesh Paleja, lead economist at the CBI. “But the recovery remains in the early stages, and firms in some sectors – particularly consumer-facing ones – continue to struggle.” Companies across Britain are now gearing up for “modest but broad-based growth”, with activity expected to rise across distribution, manufacturing and services firms, the CBI found. The business and professional services sectors were the main drivers of activity with firms reporting a four per cent bump in activity. (The writer is our foreign correspondent based in the UK)
Andy Jalil
The author is our foreign correspondent based in the UK