Britain’s professional services grapple with life after Brexit

Farzana Baduel, chief executive of London-based Curzon PR, voted for Brexit in the 2016 referendum, thinking it unfair that EU immigrants could enter the UK freely while her family members in Pakistan could not. Martin Darbyshire, head of tangerine, a design consultancy, was a fervent Remainer and felt he had to apologise for the result during a post-referendum trip to Germany.

But both agree the Brexit trade agreement, concluded late last year, has left the UK’s service businesses bewildered about what comes next. The Trade and Cooperation Agreement replaced free movement between the UK and the EU with an array of visa and work permit restrictions. While negotiators on both sides bickered until the end about fishing rights, they failed to address the post-Brexit status of service professionals. “It was almost as if they ran out of time,” Baduel says.

For the UK, this lapse is worrying because of the size and importance of its professional services sector. Before Brexit and the coronavirus pandemic, UK firms were among the world’s most prominent service exporters. In 2018, the UK had a trading surplus in services of £28bn, of which financial services made up 22 per cent and business services, such as management consultancy, design, advertising, architecture and law, 29 per cent. Service exports overall accounted for 46 per cent of total UK exports, compared with 34 per cent for France, 33 per cent for the US and 17 per cent for Germany, according to a paper last year from the research organisation The UK in a Changing Europe.

£28bn


The UK’s services trading surplus in 2018

Britain, and London in particular, which accounted for 42 per cent of the UK’s service exports, was seen as a leading business services centre, with European professionals flocking to join its firms. About 30 per cent of architects in the UK are from EU countries, rising to 70-80 per cent in some of the biggest practices, according to Andrew Forth, interim head of policy and public affairs at the Royal Institute of British Architects. “We are global leaders in airport design, public transport, sports stadiums and cultural centres,” he says.

The Covid-19 border shutdowns have prevented service firms from finding out how strictly the travel restrictions in the trade agreement will be enforced. The agreement allows UK passport holders to visit the Schengen area visa-free for 90 days in any 180 to attend business meetings, conferences and trade fairs, and to conduct negotiations. To deliver paid services in the EU, they require visas and work permits, with different rules for each country.

British management consultants working in Austria need to satisfy an “economic needs test”, showing that no EU firm can do the work. Architects working in Germany and people providing advertising services in Denmark have to do the same. Engineers working in Finland must demonstrate they have “special knowledge relevant to the service being supplied”.

We might be seen, as British, as too difficult to employ

There are dozens of similar restrictions, and professional services firms have no idea how long it will take for work permits to come through. Patrick Richard, a principal director at Stanton Williams, a north London-based architectural practice that has designed cultural projects in France, including the Nantes art gallery, says his clients are equally unclear. “On the other side of the Channel, they’re no wiser.” He worries that in France “we might be seen, as British, as too difficult to employ”.

For regulated professions such as architecture, there is another problem. Before Brexit, UK professional qualifications were recognised throughout the EU. Amanda Tickel, who leads Deloitte’s Brexit team, says the UK pressed for a continued mutual recognition system post-Brexit but the EU refused, although those who already have qualifications accepted in the EU will continue to have that recognition.

The only exception to the EU refusal was for lawyers; British lawyers can provide advice in the EU on UK and international law. Other UK professional bodies will have to negotiate mutual recognition agreements with their EU counterparts, although Catherine Barnard and Emilija Leinarte, EU law specialists at Cambridge university, wrote this month that mutual recognition is likely to be slow.

For the services sector as a whole, Darbyshire says that despite his opposition to Brexit, “it’s happened, it’s got to be dealt with”. Tangerine works with companies worldwide. Its airline clients have included not only British Airways, for which it designed the first flatbed seat, but also Japan Airlines, Cathay Pacific and Gulf Air, as well as companies in other sectors, such as Huawei, the Chinese telecoms group.

Tangerine has an office in Seoul as well as London and is used to moving professionals around, absorbing the cost of applying for work permits where needed. Competition with other designers in Europe can be fierce, Darbyshire says. Even before Brexit, Tangerine had concentrated on the US and Asia, striking up local partnerships where needed.

Baduel says that while her public relations company has several EU clients, it too is planning to expand its global reach. Given the similarities in history, language and legal systems, she sees Commonwealth countries as fruitful markets. “It’s easier for me to work with Ghana, South Africa, India than with Poland”.

Having to work remotely during the coronavirus shutdown has persuaded her that it is possible to strike up new business relationships without hopping on a plane, which will be less acceptable anyway post-pandemic, for both cost and environmental reasons.

But she worries that Brexit has harmed the UK’s reputation as a centre of professional service excellence. Even though she voted Leave, Brexit “was so incredibly divisive”, she says. It split families — her Italian husband voted Remain — and those divisions have been noted in UK export markets, she says. Even the recent Oprah Winfrey interview with Meghan Markle and Prince Harry, has projected an image of the UK as unwelcoming to outsiders, she says.

While Richard worries too about the damage to the UK’s image, for services that need professionals on site, the proximity to European customers is vital. “Paris is two-and-half hours from London. We didn’t really have to have an office in Paris. Now we might be forced to, to reassure our clients.”