12
THE UK-EU RELATIONSHIP IN FINANCIAL SERVICES
UK services imports).
33
This trade ratio is broadly replicated when looking
specifically at the trade between the UK and the EU: exports to the EU of
£23.3 billion against imports of £5.46 billion.
23. In 2019, as a snapshot of the relative importance of the EU
as a market for
the UK’s financial services prior to the UK’s departure from the EU, 37% of
the UK’s financial services exports were to the EU, compared with 30% to
the USA. For imports, the respective figures were 32.5% from the EU and
35% from the USA. The total trade in financial services between the UK
and the EU during that period was worth £28.75 billion, compared with
£24.75 billion for trade between the UK and the USA.
34
24. There is some evidence, however, that the EU has been declining as a share
of the UK’s total financial services trade. Between Q1 2019 and Q1 2021,
UK financial services exports to the EU grew by 1.35%. However, over
the same period, financial services exports to the rest of the world grew by
5.24%.
At the same time, imports from the EU fell by 35.2%, resulting in
the EU’s share of total UK financial services imports declining from 35.7%
to 25.3%. In the assessment of the ONS, it is too early to untangle the impact
of the COVID-19 pandemic from that of the UK’s exit from the European
Union, but the latter may be a factor.
35
25. In
its analysis of the ONS data, the House of Commons Library concludes
that:
“Between 2019 and 2020, the value of UK financial services exports
to the EU fell by 8% … In 2020, the fall in financial services exports
to the EU was most pronounced in Q2 and Q3, owing to disruptions
in economic activity caused by the coronavirus pandemic …
Financial
service exports to the EU have continued to fall in 2021, falling by 5%
between Q4 2020 and Q1 2021 and by a further 5% between Q1 and
Q2 2021. Compared to 2019 and pre-COVID levels of trade, financial
services exports to the EU were 31% lower in Q2 2021 than Q2 2019.”
In contrast to this:
“Financial service exports to non-EU countries continued to grow in
the first quarter of 2021, growing by 8% between Q4 2020 and Q1
2021. While exports to non-EU countries fell in Q2 2021 compared
to Q1, compared to 2019 and pre-COVID levels of trade, exports of
financial services to non-EU countries were 5% higher in Q2 2021 than
Q2 2019.”
36
33 Office for National Statistics, ‘The Pink Book, 03 Trade in Services’ (29 October 2021):
https://www.ons.
gov.uk/economy/nationalaccounts/balanceofpayments/datasets/3tradeinservicesthepinkbook2016
[accessed 8 June 2022]. These figures do not
include insurance services, which are classified separately
by the ONS.
34 Office for National Statistics, ‘The Pink Book, 03 Trade in Services’ (29 October 2021):
https://www.ons.
gov.uk/economy/nationalaccounts/balanceofpayments/datasets/3tradeinservicesthepinkbook2016
[accessed 8 June 2022]
35 Office for National Statistics, ‘The impacts of EU exit and coronavirus (COVID-19) on UK trade in
services: July 2021’:
https://www.ons.gov.uk/economy/nationalaccounts/balanceofpayments/articles/
theimpactsofeuexitandcoronaviruscovid19onuktradeinservices/july2021#exports-and-imports-of-
services
[accessed 8 June 2022]
36 House of Commons Library,
Financial services: contribution to the UK economy, Research Briefing
,
Number 6193
December 2021, Chapter 4.1
13
THE UK-EU RELATIONSHIP IN FINANCIAL SERVICES
26. However, Miles Celic cautioned that, while the trade in financial services
with the EU had declined since the end of the transition period, this reflected
a trend that had been ongoing for several years beforehand.
37
This
analysis
is supported by the ONS data, which shows that the share of the UK’s
financial services exports going to the EU had fallen from 44.2% in 2015
to 37% in 2019 and further to 34.7% in 2020. This might suggest that the
implementation of the TCA, and the loss of the passporting rights enjoyed
prior to the
end of the transition period, are not necessarily the primary
drivers of the fall in exports to the EU.
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