The UK is losing services for the benefit of Asia

Seven months after the United Kingdom left the European Union, a cold snap was felt in British trade. According to Office for National Statistics (ONS), the UK and exports of goods and services fell by 13% (36bn) and imports by 22% (66bn) between January and May 2021 compared to the same period of 2019.

A Other report Services (banking-insurance, transportation, consulting, maintenance, etc.) from the same company show that exports and imports decreased by 12% and 24%, respectively, in the first quarter of 2021 compared to the same period in 2019.

To some extent, this trend may be due to infection. However, this decline proves to be far more severe than the European average (exports fall 15% to imports 39%), indicating that it is not without a Brexit effect. The difference between the export of services to EU countries and around the world is particularly notable in areas such as construction (-43% + + 24%), maintenance and repair (-62% vs. + 11%) and manufacturing services. (-40% vs. -12%).

True Trade and Cooperation Agreement These activities rarely involve the EU and the United Kingdom. EU members are left to decide whether or not to allow their various suppliers in their markets.

To us Works It also suggests that other service exporting countries outside the EU may benefit from this situation.

Stayed in London

Ireland seems to be the biggest winner from Brexit. The island may have benefited from business relocation and business diversion from the UK, aided by lower corporate tax rates and younger and better trained staff. Between 2016 and 2019, Ireland’s service exports increased by 24% (or 4 144 billion or 12 3,123 billion) driven by financial services, information technology and transportation.

Other European cities that benefit from the Middle Ages are full of speculation. In January, Amsterdam overtook London As the largest European stock trading hub by absorbing the bulk of the trade in euro-worthy assets. London location though Come to mind again Recently.

Other potential winners are Frankfurt (for banking operations), Luxembourg (for banking and asset management) and Paris (for financial, professional and business services). Even a less serious competitor like Berlin can attract technological talent thanks to its cultural centers and affordable prices.

However, most financial operators are still up to date Stayed in London. The city still retains its strength to accommodate IPOs and other capital raising.

There is no flow of financial work outside London A fraction What supporters have predicted to keep the EU. The four-year regulatory change period for areas such as data security and e-commerce will undoubtedly be effective.

However, these divergent views undoubtedly obscure a broader movement, meaning that Europe’s ability to provide services as a whole may have been weakened.

Another opportunity in the world

Suppose a group of American investors wants to invest ஒரு 1 billion in European stocks or other financial assets. In the past, he may have created a fund in London, using the city’s lawyers, accountants, bankers and other financial experts to assist some experts in Paris and Frankfurt on questions related to France and Germany. .

Today, due to Brexit, the group can no longer invest in some European securities from London. Investors need to create a second fund, for example in Dublin, to access all the European assets they want. This extra cost and time will lead to the conclusion that betting in Asia is more profitable than in Singapore.

If we consider this effect in all fields, it will be enormous. It is certain that some investors will decide to abandon the UK in favor of EU countries or to deal with the additional costs associated with doing business. But others will find that an opportunity somewhere else in the world is now more attractive. The risk is that this will become an overall change in economic weight over time.

It seems we have already seen the signs of this.

Winners and losers

In the upcoming research, we analyzed the exports of key service providers in Europe and globally. We did this using trade data collected jointly by the World Trade Organization (WTO) and the Organization for Economic Co-operation and Development (OECD).

They show that the United Kingdom is the largest exporter in Europe and the second largest service in the world after the United States. However, it seems to have lost ground after Brexit.

Ireland and the Netherlands are experiencing strong growth in this region of Europe, while China, India and Singapore are leading elsewhere. Growth in UK service exports slowed to 11% during 2016-2019 compared to 2010-15.

Export of services by country between 2015 and 2019

On the left, 2015 data; On the right, the trend until 2019 (acceleration in the growth of green bands, and a decrease in red bands). BaTIS

The findings of our latest published research show that the share of UK export services has increased from 8.9% in 2005 to 7% in 2019.

Meanwhile, growth in France, Spain, Italy and Belgium also slowed, while Germany, the Netherlands, Switzerland, Luxembourg, Austria and the United States remained stable. Ireland is the fastest growing service exporter, but Singapore and India also have its status.

Significantly, between 2016 and 2019 we see growth in Asia in areas such as travel, finance, information technology and creative services. In particular, there has been extraordinary growth in Singapore in the areas of finance, trade, insurance and pensions, as well as in many sectors in China. It sounds like a real boom.

This development may be somewhat reflected Industrial change Is happening in the Asian world, which is shifting from manufacturing to services. It may also reflect the global restructuring – the long-term shift of service centers from west to east.

The question for years to come is whether it will be relevant to the UK and its European service counterparts, whether they can find arrangements to help maintain their joint strength – and to what extent they can exploit opportunities, especially in developing countries, where US service providers now play a leading role.

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ByJune to , Professor of Economics, Director, Lloyds Banking Group Center for Business Prosperity (LBGCBP), University of AstonAlexander Shebotillo

, Senior Lecturer in Economics, University of Aston. The original version of this article was publishedEnglish