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Monday, 23 July 2018

The Cost Of My Professional #Brexit Preparations - £9,000 in Year 1

Few politicians will talk about the plight of the UK's trade in services after Brexit, presumably because they don't understand how it works, much less care. Yet services represent 80% of the UK economy, while UK firms and individuals exported £245 billion in services in 2016. But the UK had an overall trade deficit of -£67 billion with the EU in 2017, because a surplus of £28 billion on trade in services (exporting more than we imported) was outweighed by a deficit of £95 billion on trade in goods. The affected service providers will be hoping for this insane project to stop, but in the meantime we must prepare for the worst, whatever that might be...

Services affected by Brexit include, say, a British architect designing a building for a German client; the Manchester hotel catering for Italian tourists; or the Edinburgh accountants advising a French exporter.

Financial services and other business services (legal, accounting, advertising, research and development, architectural, engineering and other professional and technical services) made up 52% of UK service exports to the EU. And, of course, many businesses in those categories supply services to each other. 

So, the fact that financial licences won't work across the EU after Brexit, for example, means UK finance firms are moving their EU-facing operations into a remaining EU27 country and serving the rest of Europe from those offices.

Similarly, the fact that my UK legal qualifications won't be recognised in the EU means that I'll need to set up an additional presence somewhere in the EU27 (Ireland, in my case) just to keep advising my financial services clients on their EU-facing operations.

So, for me personally, the cost of doing business as usual after Brexit is at least £9,000 in fees the first year, and £6,000 each year after that, excluding any travel and accommodation. That's a big investment to make on the assumption that local lawyers elsewhere in the EU27 don't simply take my EU-related work away from me. But it's also money that will be spent in Euros in Ireland and not in the UK. Ireland is the winner here.

But this is not just a sob story about financial institutions and their professional advisers. The British woman, based in France, who drives skiers from Geneva airport to Morzine in her UK minibus on her UK bus licence won't be able to do that anymore, either.  Courier firms are also horrified, not just about vehicle or driver licensing issues and the higher costs and complexity involved in the movement of goods, but also because they employ EU staff with language skills and other key knowledge who may simply want to leave

What hoteliers make of all this is anyone's guess, it seems, but PWC suggests the biggest problem will be the ability to recruit and retain staff with the right language skills and experience. Based on the impact on financial and other business services, perhaps the movement of EU-facing operations into the EU may also mean less need for UK management and staff to travel to EU offices.

Of course, a market should develop around the need for advice on how to prepare for the worst. But for that to happen, we need to be much clearer on the impact of Brexit on services in the first place.