LONDON: August 10, 2016. A report from the Institute for Fiscal Studies (IFS), says Britain's service sector accounted for 39 percent of the country's exports to the European Union in 2015. By comparison Brazil, Russia, India and China totaled less than 5.0 percent of the country's service exports last year.
The report explains that EU membership is completely different from EU access: "Single market access is virtually meaningless as a concept," said IFS associate and report lead author Ian Mitchell. "Any country in the World Trade Organisation (WTO) – from Afghanistan to Zimbabwe – has 'access' to the EU as an export destination.
"Single Market membership by contrast involves elimination of barriers to trade in a way that no existing trade deal, Customs union or free trade area achieves. In particular it means reducing 'non-tariff' barriers like licensing and other regulatory constraints to supplying goods or services. These sorts of barriers have become relatively more important to trade than tariffs (taxes on trade), and especially so for services," he explained.
Noting that continued EU membership is likely to offer Britain significant economic benefits - particularly for trade in services – the IFS report argues that a Brexit will result in accepting the cost of future regulations designed in the EU without UK input.
"Those costs are salient and the benefits of membership are diffuse – but the financial benefits are real and, at the moment at least, likely to outweigh the financial costs," said Mitchell.
With the EU accounting for 44 percent of UK exports and 39 percent of service exports, the report points out that even small losses in trade with the EU would require "probably implausible" increases in trade with China or India to compensate.
According to reports, China has invested US$38 billion in Britain since 2005 and has said relations are at a "crucial historical juncture" following the UK government's decision to review China's investment in the long-delayed construction of an £18+ billion nuclear power station at Hinkley Point in the West of England. (Pictured: artist's impression)
The IFS concludes that Britain is faced with the choice of continued EU membership and contributing a net £8 billion to the EU Budget, or opting for a European Economic Area, Free Trade Association or WTO model.
The research institute suggests that giving up EU membership would result in a UK tax receipts shortfall of at least £32 billion by 2020. On August 05 the Bank of England forecast 250,000 job losses by 2018 as a result of Brexit.
"From an economic point of view we still face some very big choices indeed in terms of our future relationship with the EU. Choices in these domains will most likely be far more important than any deal on budget contributions," Mitchell concluded.