Services contributed 81% to the UK economy in 2019. With the UK running a trade surplus with the EU in services, this cross-border trade is vital to ‘UK plc’. Deal or no deal, here’s what you need to think about now.
From 11pm on 31 December 2020, UK businesses will no longer be treated as if they were local to the EU. The result? Services provided by UK businesses and professionals will be regarded as originating from a ‘third country’ in the bloc. This is likely to mean trading in services with the EU will become more complicated and even if there is a favourable trade deal there will be more ‘hoops to jump thorough’ compared with now.
In this series of bite-size ‘Brexit countdown’ articles, we focus on the commercial implications of ‘Brexit 2.0’ in certain key areas and set out a high-level overview of the sort of things you should be thinking about with your teams and customers, and what you should be doing to get yourself Brexit-ready.
Last time, we looked at border controls and customs formalities. In this article we look at the freedom to provide services.
What sorts of things should you typically be thinking about?
Consider these key matters in particular:
- have you considered whether any new restrictions may apply to the provision of services, whether for EU member states or other countries?
- have you considered the costs that may be involved in complying with these restrictions, where compliance with such restrictions is possible?
- depending on whether a trade deal is agreed, UK businesses may no longer have the ‘fundamental’ freedom to provide services in the EEA; equally EEA businesses may not have the right to do the same in the UK. Have you considered what impact this may have?
- UK service providers providing services in the EEA may no longer be subject to the Services Directive and may be treated as third country service providers. If so, EU member states may be allowed to discriminate against UK service providers, within the scope of the EU's WTO GATS (General Agreement on Trade in Services) commitments. Have you considered if this impacts you? If so, how?
- Host state rules may apply to UK businesses wanting to sell services in the EU. Generally speaking, the EU does not have one uniform external services trade policy towards third countries (which will include the UK from 2021). This means that rules may vary from member state to member state. Have you considered what impact this may have?
- UK service providers may face additional legal and administrative barriers. Have you considered:
- any requirements based on nationality?
- the need to resubmit information to regulators?
- the potential loss of access to online portals to complete mandatory applications and licences?
Of course, every business will need to consider its own particular circumstances based on factors such as, in particular:
- its location
- the nature of its goods and services
- the business, economic and regulatory environment in which it operates
- the location of its key customers and suppliers, and
- the make-up of its workforce.
There is no one-size-fits-all approach to the analysis you need to do but thinking about the commercial aspects above can help you decide what legal changes (if any) are necessary now and in the months to come.
At Shoosmiths, we have stayed close to Brexit developments. As always, we welcome any thoughts or comments from you and are ready to help you prepare for Brexit.
We are also producing briefings across all specialisms to keep you informed of legal changes anticipated in light of Brexit.
If you have any queries, do get in touch.
In the next article in this series, we’ll be looking at the labour market and free movement of people.