Graphic shows UK trade with EU and non-EU countries in 2018.
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BUSINESS

Trade between the UK and EU

By Duncan Mil

December 10, 2019 - British Prime Minister Boris Johnson hopes to sign a free trade agreement with the European Union by the end of 2020. While the EU enjoys a bilateral trade surplus in goods, the UK is far more competitive in the area of services.

Johnson wants a majority in parliament to ratify the withdrawal agreement that he negotiated with the EU in October and produce an orderly Brexit on January 31, 2020.

That will lead to an 11-month implementation period and free trade talks with the EU. During this time, a Johnson government will also start trade negotiations with countries like the United States.

Given that it enjoys a bilateral trade surplus on goods that it wishes to preserve, the EU will likely accept a deal covering a vast list of goods.

However, it could be more challenging to negotiate a free trade deal on services, as the UK is far more competitive in that area than the rest of the EU.

Services account for around 80% of the UK economic output and 46% of UK exports, and this share has been growing over time. The UK is the world’s second-largest exporter of services by value and is a world leader in many service activities such as financial services. Taken as a single entity, the EU is the UK’s largest export market for services, accounting for 41% of all service exports.

In 2018, UK service exports to the EU were worth £120 billion, while service imports were worth £92 billion.

Nevertheless, Brexit-related uncertainty will continue in 2020, as a Conservative-led government would struggle to reach a free trade agreement with the European Union before a year-end deadline.

PUBLISHED: 10/12/2019; STORY: Graphic News
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