£225bn could be wiped from UK's professional services industry due to Brexit, reveals Lords report
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The UK's professional services industry is at risk of losing £225 billion in value because of Brexit, a parliamentary committee has warned.
A report by the House of Lords' EU services subcommittee, published on Tuesday, said Britain's professional firms - including accountants, lawyers, and recruiters - have largely been ignored in negotiations with the EU.
It concluded that even if the UK secures a "Canada Style" trade deal, the industry would still face a loss of jobs and contracts unless a bespoke agreement could be reached with Brussels.
Baroness Donaghy, who chairs the committee, said: "More than four and a half million jobs depend on this sector and it contributes almost £225 billion to our economy.
"This sector, and the people who depend on it for their livelihoods, will suffer if its needs are not reflected in the UK’s negotiations with the EU. We are concerned that they have been overlooked."
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The committee was also critical about the EU-Canada Comprehensive Economic and Trade Agreement (CETA), calling in ineffective.
Prime minister Boris Johnson has touted the agreement as a model he would like Britain to strike with the EU.
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However, certain clauses in the deal, such as forcing foreign companies to adopt domestic corporate structures, making foreign professionals to become resident in a certain country, and demonstrating that talent is not available locally before hiring from overseas, could complicate UK businesses wishing to operate in the EU after Brexit.
The report warned that without a UK-EU trade deal, "UK lawyers may become unable to operate in the EU under UK-specific corporate structures, in particular limited liability partnerships".
UK auditors may also be barred from inspecting work done by their EU counterparts on British subsidiaries operating in Europe if the trading bloc decides not to recognise UK regulations as an equivalent standard - an issue which is being discussed separately to free trade.
John Boulton, a director of technical policy with the Institute of Chartered Accountants in England and Wales, said the issue was a "piece of the plumbing" that needed fixing before the end of the Brexit transition period.
"The hope is that more sensible minds prevail but that is the reality of EU law suddenly pulling away," he said.
Helen Brennan, a director of KPMG UK, said in the report that a lack of bridging audit standards "could contribute to a gradual erosion of trust in audit itself".
The report warned that CETA had been ineffective so far and that efforts were being made by the UK government to ensure the EU recognises UK professional qualifications.
It also noted travel restrictions - such as imposing a 90-day limit on stays, which CETA permits - could have a negative impact on business.
A UK government spokesperson said they were pushing for business interests throughout the talks.
They said: " We have tabled far-reaching proposals in this area that are appropriate for an Free Trade Agreement, but we have been met by resistance from the EU and have had to adapt accordingly.
"We remain committed to working hard to reach an agreement, and hope to see EU proposals that at least match what they have offered to other third countries."