Trade in Services

Key facts:

• Since 1 January 2021, the UK is outside the European Single Market, including services.
• A Trade in services section of the EU-UK Free Trade Agreement (Part Two, Heading One, Title II: Services and investment) sets out terms on trading goods between UK and EU.

Since 1 January 2021, UK businesses trade with the EU under the terms of the EU-UK Free Trade Agreement.

Summary of the Trade in services provisions contained in the EU-UK Free Trade Agreement:

Key positive outcomes for businesses:

• Reduced barriers for services providers. In principle, service providers will not need to establish a local presence to trade within each other’s markets – and they will be able to avoid economic needs tests, residency requirements and a range of other non-tariff barriers. However, there are very lengthy reservations listed to these main provisions.  The parties have agreed ‘national treatment’ to prevent discrimination between nationals and ‘most favoured nation’ provisions to ensure the treatment of service suppliers keep pace with either party’s future free trade agreements.
• Government procurement. The UK and EU agreed to continue to allow access for their respective businesses to bid for each other’s government procurement contracts, going beyond the obligations set out in the WTO Government Procurement Agreement.
• Business mobility rights. Business mobility rights have been agreed, i.e. attending conferences, seminars, meetings for short-term stays, permitted for 90 days in any 180 day period.  Intra-company transfers (with spouses and dependents), contract and self-employed working are also supported.  Travellers will otherwise rely on the rules of individual member states for the right to work as the free movement of people ends.
• Removal of unjustified barriers to digital trade, including prohibition of data localisation requirements, which respecting data protection rules.

Key negative outcomes for business

• Services trade barriers. Although services provisions have been included, they do not go much beyond existing EU practice, and notable barriers will limit the scope of many services providers to trade between the EU and the UK.
• No new recognition of professional qualifications. Barriers to services trade include the end of the mutual recognition of professional qualifications and significant restrictions from the EU regarding the extent to which it commits to allowing UK service providers to access their EU customers.
• Audiovisual services. UK operators no longer will be free to supply audiovisual services in the EU with UK licence.

Issues which have not been agreed yet

• Financial services: UK and EU have committed to setting out a framework for regulatory cooperation in financial services by March 2021 and will discuss the equivalence decisions which the EU has yet to make. The EU had made temporary equivalence decisions in respect of clearing (for 18 months), and central securities depositaries, recognising the importance of UK infrastructure to EU markets and the potential financial stability risks of a cliff edge termination. The EU had not otherwise mirrored the UK’s other equivalence decisions or taken steps to smooth the transition.

To do

Anticipate the new commercial environment for trade in services and consider the following:

Laws

• Check what you need to do via the Government Brexit checker tool and EU Readiness Notices.
• Familiarise yourself with the Trade in services section of the EU-UK Free Trade Agreement (Part Two, Heading One, Title II: Services and investment) sets out terms on trading goods between UK and EU.
• Find out about changes to rules for your specific sector: e.g. audiovisual, finance, transport, e-commerce etc., and whether you will need an EU presence.
• Find out about the local rules in your customer’s country through the following links: Government’s country-by-country guides, EUGO Points of Single Contact, the e-justice database.
• Check the need for professional qualifications, licences and authorisations to operate in a particular EU country.
• Find out if your qualifications and licences will be recognised in the country you are active in via the Centre for Professional Qualifications (0871 226 2850, 11p per minute) or the national contact points in the EU member states (scroll down the page).
• Check for any specific paperwork and other requirements when sending packages or parcels to your EU customers, suppliers or other parties through a courier

Employment and mobility requirements

• Find out about local immigration policies and work permits in EU member states.

Tax

• Consider the VAT implications of selling your services to the EU.

What’s next?

The movement of capital, services and people between the UK and the EU will no longer be as free as it has been for much of the past 30 years. The new post-Brexit deal contains commitments on market access for services but there will be multiple exceptions to what can be traded and how, therefore there will be restrictions.  Although certain short-term business trips between the UK and the EU will be visa-free, again there will be some new restrictions.