The EU's £1.6 trillion services industry is 'extremely concerned' Britain is heading for a 'cliff-edge' Brexit

  • EU and UK’s services sector breaks Brexit silence to warn negotiators it is “extremely concerned” about the length of the 20-month transition window from March next year.
  • The services sector represents 74% of EU GDP and 80.4% of UK GDP.
  • The ESF said Brexit risks “major disruption” with “the danger of adverse consequences in terms of employment and wealth-creation across the EU.”
  • Both sides should provide clarity on the Withdrawal Agreement “as soon as possible,” the ESF’s chairman said.

LONDON – A lobby group for the European Union’s £1.6 trillion services sector has broken its silence on Brexit to warn it is “extremely concerned” the 21-month transition period will not be long enough to avoid a “cliff-edge.”

In a letter to the EU and UK’s chief Brexit negotiators Michel Barnier and David Davis, the ESF warned that Europe’s services sector could need to extend the 21-month transition window in order to avoid “major disruption” with “the danger of adverse consequences in terms of employment and wealth-creation across the EU.”

The ESF said that negotiations had so far focused on goods-related issues – which form a far smaller part of the EU and UK GDP. Services, on the other hand, make up around 80% of the UK economy.

It said in an additional statement it was “extremely concerned that – even with the strongest political will from both sides – a period of 21 months is unlikely to be sufficient to cover all the stages needed to put in place the future relationship, from initial agreement to implementation.”

The group said that action was needed to avoid a “cliff-edge” scenario in a wide number of areas, including arrangements that ensure existing contracts between UK and EU firms are not broken after Brexit, a prospect which firms are treating with growing alarm as Brexit day in March 2019 edges closer.

The ESF, which has not previously commented on the progress of Brexit negotiations, joins a rapidly increasing number of firms and finance groups issuing warnings about the dangers of a “no-deal” Brexit.

Plane manufacturer Airbus warned last week that a hard Brexit would risk 14,000 UK jobs, while BMW also said it would move UK operations if customs delays disrupted its supply chain.

“Extremely concerned”

Services – which describe everything from financial services to postal delivery and maritime transport – form the basis of the UK and EU27 economies, representing 74% of EU GDP and 80.4% of UK GDP. The EU is the largest services exporter in the world, exporting £1.66 trillion in 2016, with the UK the largest services exports at £167 trillion.

Even with the strongest political will from both sides – a period of 21 months is unlikely to be sufficient

Noel Clehane, ESF chairman, said both sides should provide clarity on the Withdrawal Agreement – which is still being negotiated – “as soon as possible” in order to “allow some flexibility in the management and duration of the transition period”

A list of ESF members who supported the position included some of Europe’s biggest private companies, unions, and lobby groups, including BT, the HSBC Group, the European Broadcasting Union, Microsoft Europe, and Thomson-Reuters.

Prime Minister Theresa May heads to Brussels this week for the European Council summit. Negotiators had hoped to make progress on issues including the Irish border, but Brexit has been booted down the agenda in recognition that such progress is now unlikely.

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