Behind the economy

British services exports boom despite Brexit

The hordes of white collar British exporters do not seem to have been hurt by Brexit. Archival

For some Brexiteers, the aim of leaving the EU was to revive the country's manufacturing sector, arguing that abandoning London's role as Europe's financial hub would mean a weaker pound exchange rate, helping the country's long-standing "dormant" manufacturing sector recover and grow. But what happened, according to the Economist, is that exports of goods declined, and Britain enjoyed a remarkable export performance in terms of its exports of services, which have risen since the entry into force of the new trade and cooperation agreement with the European Union at the beginning of 2021 by 3.6%. Hordes of white-collar British exporters do not appear to have been hurt by Brexit.

Sophie Hill, an economist at Resolution Foundation, says that "trade in services is very important to the United Kingdom, and it is less dependent on the European Union than trade in goods," pointing out that about 36% of Britain's exports of services are destined for the European bloc compared to 47% of its exports of goods. Advisers and bankers in London have benefited from America's particularly rapid recovery from the pandemic, with transatlantic services exports up 43% compared to 2018, the last full year before trade patterns were distorted by Brexit and the coronavirus pandemic.

For example, students from India and other countries have successfully offset the decline in demand for education from the EU, and exports of education-related travel to India have risen by 435% since 2018. The treaty, which agrees to the mutual recognition of qualifications, as well as move to liberalize beyond the student visa system, has helped increase the number of learners.

But the biggest explanation for the difference between goods and services lies in exports to the EU itself. Goods exports from Britain to the EU did not regain their level in 2019, while services exports rose by 16%. Europe's single services market is less developed than the goods market, and service firms may also have found smart ways to ease trade friction and interest in services.