Brexit: why is the government favouring goods over services?

Senior business leaders have pleaded with the prime minister to protect Britain’s vital professional services sector, amid suggestions the government is prioritising goods over services in the Brexit negotiations.

A letter signed by 42 members of the Professional and Business Services Council (PBSC), which represents the law, audit, consultancy, advertising and architecture sectors, warned Theresa May that failing to negotiate the right Brexit deal could damage a £188bn industry that employs 4.6 million people and “keeps the wheels of the British economy turning”.

The letter called for mutual recognition of qualifications, products, court judgments and operating licences between the UK and EU as well as a guarantee for the rights of professional workers to travel and hire in the bloc.

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It follows a similar warning from the British Chambers of Commerce, which published a list of 23 “real-world” questions that it says urgently need answering, including whether firms will be able to transfer staff between the UK and the EU as they do now.

Services account for about 80% of the UK economy, and the UK sells more services to the EU than it buys, but “to date, negotiations have focused on the frictionless movement of goods between the UK and the EU” says the BBC.

Last week, Business Secretary Greg Clark echoed business concerns by insisting services must be part of any Brexit deal with the EU. He said the £90bn of services exported to the EU in 2016 amounts to “more than to our next eight largest partners - the United States, Switzerland, Japan, Australia, Canada, China, Singapore and Norway - combined”.

The government’s latest proposal for a customs union deal, which would effectively keep the UK in the single market for goods but not for services, was rejected last week by the Irish Taoiseach Leo Varadkar as “unrealistic”. He said it would lead Eurosceptic parties across Europe demanding the same sort of deal.

Henry Newman, the director of the Open Europe think tank, said his organisation’s blueprint for a future trade agreement with the EU “recognises that the UK is too big an economy to be a rule-taker in areas like financial services, while accepting that we can get a very good degree of access in goods by giving up a limited amount of control.”

The Open Europe report, dubbed “Striking a Balance”, found an unlikely ally in former Tory chancellor Lord Lamont, who backed the idea that Britain should defer to the EU on goods because the UK’s “proportion of trade with Europe is higher than that of our services”.