Services trade and the future relationship between the EU and the UK

Many previous analyses have examined the effects of Brexit on goods trade, but there have been limited efforts to analyse the impact on Danish services trade in detail. In 2018, Danish services exports to the UK surpassed the goods exports, primarily driven by increased installation of offshore wind turbines in UK waters in recent years.

The UK formally left the European Union in January 2020 but is still a part of the EU Customs Union and the EU Single Market during the transition period, due to last until 31 December 2020. However, the EU and the UK are yet to reach an agreement on the future relationship. The revised political declaration of October 2019 sets out the framework for the future relationship that guides the negotiations. If no agreement is reached – a so-called No deal scenario – trade between the EU and the UK will be governed by WTO rules.

In this report, we examine rules and regulations that are important for the future services trade between Denmark and the UK. We analyse the impacts on the Danish service sectors in four different Brexit scenarios:

• A free trade agreement based on the most integrated interpretation of the revised political declaratio
• A free trade agreement based on the least integrated interpretation of the revised political declaratio
• A Customs Union
• A Brexit without a free trade agreement

The main conclusions of our study are:

• Danish exports of goods and services to the UK will be 12 to 35 percent lower in 2030, relative to a scenario where the UK remained in the EU
• The important Danish services export industries to the UK are construction (including installation of offshore wind turbines), transport services, business services, ICT-services, and wholesale and retail
• Danish exports of transport and business services to the UK are expected to be most adversely affected by Brexit, while exports of construction and ICT services are expected to experience relatively moderate impacts
• The same pattern is expected for Danish imports from the UK, where transport and especially business services are expected to be the most affected sectors
• Overall, Danish long-term GDP is expected to be 0.3-1.2 per cent lower compared to if the UK remains in the EU
• Maintaining public procurement rules and mutual recognition of professional qualifications are important for the construction service trade between Denmark and the UK

The study is commissioned by the Danish Ministry of Industry, Business, and Financial Affairs.