Britain is Stronger in Europe: Report on Single Market

25 January 2016

The document released by the 'In' campaign shows that the UK financial services sector is a major beneficiary of the EU single market, with financial services constituting 25% of UK services exports to the EU, worth £20.2bn in 2014.

This paper highlights the value to the UK economy of full access to Europe’s single market, covering goods and services. This is a benefit to British businesses, in particular to the service sector and UK financial services. [...]

1. The value of the EU’s single market to the UK economy 

• The EU single market boosts trade: The Centre for European Reform shows that our goods trade with EU countries is 55% higher because of EU membership. This is the “EU effect” on UK-EU goods trade. Analysis using publicly available ONS data shows that UK goods trade with the EU was £374bn in 2014. The “EU effect” in 2014 therefore amounted to £133bn. This £133bn is the equivalent to over £670k in extra trade on average for each business which exports or imports goods with the EU.
• The EU single market brings foreign investment: Insurance experts Euler Hermes have predicted that the stock of FDI would fall by 20% following the referendum (2016-2020) if the UK does not have a Free Trade Agreement with the EU. The latest ONS figures implies that £206bn could be lost from the stock of FDI in the UK.
• The EU single market boosts working people’s incomes: In written evidence to the House of Lords, the Department for Business Innovation and Skills note benefits to the UK of 6% higher income per capita from the Single Market as a result of increased trade.
• The EU single market will bring more jobs and growth in future: The Centre for Economic and Business Research has estimated the UK would see an additional £58.6bn and 790,000 additional jobs by 2030 from deepening the single market.
• The EU single market increases UK productivity growth: Independent evidence shows that 60% of aggregate UK productivity growth was attributable to exporting firms, whose biggest customer is the EU.
• The EU single market allows the UK to avoid costly transaction costs when trading across Europe: CityUK have highlighted how outside the single market the UK would have to face costly rules of origin, estimated as c.8% of the value of exports.

3. The single market is particularly vital for the UK service sector, in particular the UK’s financial services sector

• Access to the single market in services is extremely important for the UK economy, as the service sector constitutes 78% of the UK economy.
• Furthermore, the UK financial services sector is a major beneficiary of the EU single market, with financial services constituting 25% of UK services exports to the EU, worth £20.2bn in 2014.
• The UK also has a £17.1bn trade surplus with the EU in services, of which £16.6bn is in financial services.
• The single market is particularly vital for the UK’s financial services sector, which employs 1.1m people.  95% of directors and partners of City firms say the single market is important for the UK’s future competitiveness, and 90% of directors and partners of City firms think withdrawal from the EU would damage the UK’s competitiveness.
• The Government’s Balance of Competences review concluded that the access to the single market was “critical” to maintaining the UK’s position as leading financial centre. “The existence of the EU Single Market and UK access to it were considered in the evidence to be critical to the consolidation of the UK’s position as a leading international financial centre. Respondents highlighted the importance of the EU as a market, the value of the passporting regime which enables firms to be authorised in the UK and then operate across Europe, and the role of the Single Market in facilitating access to non-EU markets. Evidence emphasised the UK’s share of the single market in financial services, the link between the UK’s position as a global financial centre and the development of the Single Market, and surveys setting out business support for access to the Single Market” UK Government, Review of the Balance of Competences between the United Kingdom and the European Union The Single Market: Financial Services and the Free Movement of Capital, 2014
• The EU passport for financial services allows companies based in London to access over 500 million consumers across the EU, which attracts significant investment in the UK. “Firms invest in London because they know that they can benefit from access to 27 markets via the EU passport for financial services.” City of London Corporation, Submission to the Balance of Competences Review, March 2013
• Without access to the single market, the UK would have no influence over the rules we would have to adhere to in order to export to the EU. “Removing non-tariff barriers would require compliance with EU regulation imposed from Brussels without Britain playing a role in its formulation. A particular worry for business would be the impact this would have on the UK’s financial services sector, potentially threatening the City’s position as the world’s leading financial centre.” CBI, Our Global Future, 2013

Full report

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