Mayor warns Government ignoring service sector in Brexit negotiations

26 June 2018
  • Ministers have their priorities all wrong, Sadiq to tell MPs

The Mayor of London, Sadiq Khan, will today warn that the Government is ignoring service industries in the Brexit negotiations and risking significant job losses, not just in the capital but across the United Kingdom.

 

Speaking at the Public Administration and Constitutional Affairs Committee investigation into Brexit today, the Mayor will say that the Government is wrong to only prioritise a deal on goods rather than a deal on services.

 

He will tell MPs that while the Prime Minister, Theresa May, has recently outlined her commitment to a single market for goods, excluding services from this is evidence that the Government has its priorities all wrong for the negotiations.

 

Trade in services accounts for roughly 40 per cent of UK exports to the EU and includes industries such as financial services, accountancy and the legal profession.

 

Sadiq will highlight to MPs an EY report on foreign investment flows published earlier this month that showed Brexit is already damaging the UK’s economy, after the UK’s attractiveness as a destination for foreign direct investment (FDI) fell to third place in investor ratings, behind Germany in first and France in second.

 

Service industries account for 92 per cent of London’s economy, but they are also vitally important to towns and cities across Britain. The service sector accounts for around 82 per cent of Birmingham’s economy, 83 per cent in Leeds, 92 per cent in Manchester and 91 per cent in Edinburgh.

 

He will also echo former chairman of the City of London Corporation Mark Boleat, who said in a speech at the Cass Business School recently that, although the City would not die as the financial capital of Europe, it would be damaged by Brexit.

 

The Government’s recent proposals for a Brexit backstop agreement, to be used if the new UK/EU trading regime isn’t in place in time, focus solely on goods and make no allowances to protect the UK’s services exports.

 

Speaking ahead of his appearance at the Committee, the Mayor of London Sadiq Khan, said: “The United Kingdom has a vibrant services industry responsible for employing more than 20 million people across the country.

 

“Any deal struck by the Government that focuses just on goods, at the expense of services, could seriously damage our economy. The Government’s current approach is further evidence, as if we even needed it, that the Prime Minister has her priorities all wrong.

 

London is unquestionably the best place in the world to do business. The city is built on strong foundations of innovation, entrepreneurship, creativity and a world-class financial hub - and that is not going to change. 

 

“But we are already seeing major banks establishing subsidiaries in other EU countries, or moving part of their business out of the capital because EU law requires them to be legally compliant from the day the UK leaves the European Union.

 

“If the Government does not change its approach and strike a deal that secures access to the Single Market for services, this trend will only continue. The result will be fewer jobs, less investment and less prosperity the length and breadth of the country.”

 

EY’s 2018 UK Attractiveness Report revealed that the UK attracted six per cent more FDI projects in 2017 compared to 2016, but in a European market growing at 10 per cent annually its market share fell for the second successive year.

 

The UK’s attractiveness fell to third place in investor ratings, behind Germany in first and France in second, which has seen a 31 per cent surge in FDI projects. 

 

It also showed that investor concerns over Brexit led to a decline in financial services, business services and HQ investments into the UK - against an expanding European market.

 

Nevertheless, there was a rise of 34 per cent in digital projects in London, giving the city almost a fifth of the European market and nearly two-thirds of all UK digital projects.

Notes to editors

The EY 2018 UK Attractiveness Report is available at https://www.ey.com/uk/en/issues/business-environment/ey-uk-attractiveness-survey.