Brexit would damage lawyers’ access to single market, Treasury predicts

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19 April 2016

Out is bad for lawyers, says Treasury

Out is bad for lawyers, says Treasury

Lawyers will be worse off if the UK leaves the European Union because of a reduction in access to the single market, the analysis published yesterday by the Treasury has claimed.

It said lawyers have faced more trade barriers in the EU than any other professional services sector but that around 70% of them have been removed in whole or in part as a result of membership of the union.

The report, which looked at the long-term impact of Brexit and the alternatives – such as negotiating the type of bilateral agreement with the EU that Canada, Switzerland and Turkey have – predicted that overall Britain would be worse off by £4,300 a year per household if the UK votes to leave.

It said the UK’s professional services sector made the second highest contribution to the UK’s large trade surplus in services with the EU, after the financial services sector.

Separate research by TheCityUK last year put the legal services sector’s trade surplus at £3.1bn in 2013, a figure that had doubled in a decade. It said 316,000 were employed in the sector.

The Treasury report said: “If the UK was to leave the EU, the professional services industry would be worse off because of a reduction in access to the single market. An increase in non-tariff barriers would make trade in this sector more difficult.

“The Services Directive ensures that EU professional services firms can establish subsidiaries in other member states or trade across borders without facing discriminatory or unjustified barriers.

“The Mutual Recognition of Professional Qualifications system means that a firm’s employees can have their training and qualifications recognised throughout the EU, making this process easier in a way unparalleled outside the EU.

“For example, these EU laws allow a UK architect to be recognised as qualified in other member states, and to provide their services across EU borders without the need to set up a subsidiary or requalify.

“There would be substantial gains from further integration of services markets, and professional services in particular. As a first stage, a more ambitious implementation of the Services Directive would remove a significant number of barriers to trade in the sector.”

A table in the report – drawn from research published in 2012 – showed that lawyers faced significantly more barriers to trade than the five other services listed, including accountants and tax advisers. There were more than 140 barriers in all, of which around 80 have been partially removed and 20 totally removed.

The report said that none of the alternative relationships the UK could have with the EU “would provide the same level of access for professional service firms. Firms would not have the same rights to operate across borders and would face additional restrictions on their activities. Large firms may be able to use alternative but less productive arrangements that are prohibitively expensive for SMEs”.

Looking at how bilateral agreements are working, the report continued: “Mutual recognition of professional qualifications is subject to future negotiations between Canada and the EU whereas, as part of the EU, many UK professionals such as doctors, architects, lawyers, and vets have their qualifications recognised by other EU countries.

“There are some limitations in terms of public procurement, where there remain a number of restrictions and exemptions that do not apply to EU firms. Overall, sectors accounting for almost half of UK services exports to the EU would face significant impediments if the UK were to replicate the Canada agreement following an exit from the EU.”

Switzerland, meanwhile, through more than 120 specific agreements, has negotiated partial access to the EU market, but this “falls well short” of what both the single market and European Economic Area membership provides.

“Switzerland has limited guaranteed market access for professional services, including accountancy and legal services. Relevant individuals, including self-employed professionals, can only provide services in the EU for a maximum of 90 days each year. This places significant constraints on Switzerland’s capacity to export to the EU.”

Law Society research last year predicted that legal services would be more heavily affected than the UK economy as a whole should the country withdraw from the EU.

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