London mayor warns of cliff-edge scenario for service industries after Brexit

PUBLISHED: 14:34 26 June 2018 | UPDATED: 17:00 26 June 2018

London Mayor Sadiq Khan gives evidence to the Commons Public Administration and Constitutional Affairs Committee

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Major job losses will occur if the government allows service industries to "fall off a cliff edge" after Brexit, London mayor Sadiq Khan has told MPs.

Mr Khan called for much greater emphasis to be put on the sector during withdrawal negotiations with Brussels as services account for 40% of UK exports to the EU and make up 90% of the capital's economy.

The London mayor told the Public Administration and Constitutional Affairs Committee: "I welcome the government announcing there should be a backstop agreement in relation to frictionless trade for goods. It needs to extend though to frictionless trade for services as well.

"Because if... we don't reach an agreement on goods and services by end of transition and there is a danger of falling off a cliff edge, it is not simply trades in goods that we should worry about, it's also trades in services.

"And the City of London, who aren't bellicose, who aren't used to hyperbole, they've said they worry about 10,000 jobs being lost.

"That's, I think, a conservative estimate. We can't afford that situation where after transition period we fall off a cliff edge in relation to trades in services."

Mr Khan said prime minister Theresa May had her priorities wrong in Brexit talks and should pay more attention to areas of the economy like financial services, accountancy and the legal profession.

Around 92% of London's economy is made up of the service sector, the same as Manchester, while it accounts for 91% in Edinburgh, 83% in Leeds and 82% in Birmingham.

Mr Khan said: "The United Kingdom has a vibrant services industry responsible for employing more than 20 million people across the country.

"Any deal struck by the government that focuses just on goods, at the expense of services, could seriously damage our economy.

"The government's current approach is further evidence, as if we even needed it, that the prime minister has her priorities all wrong.

"We are already seeing major banks establishing subsidiaries in other EU countries, or moving part of their business out of the capital because EU law requires them to be legally compliant from the day the UK leaves the European Union.

"If the government does not change its approach and strike a deal that secures access to the single market for services, this trend will only continue.

"The result will be fewer jobs, less investment and less prosperity the length and breadth of the country."

Mr Khan's message was echoed by the chairman of the European Services Forum Noel Clehane, who said: "The business community requires legal certainty as early as possible.

"We therefore call on the negotiators to take all necessary steps to minimise business disruption, to provide clarity as soon as possible on the withdrawal agreement, and to allow some flexibility in the management and duration of the transition period."

Asked how negotiations on the Brexit deal were progressing, European Commission spokesman Margaritis Schinas told a Brussels press conference: "Average, with a potential of improvement."

Mr Khan's intervention came as the Society of Motor Manufacturers and Traders (SMMT) called for the government to end uncertainty over Brexit as it said investment in the British motor industry had fallen by nearly a half in a year.

The SMMT said £347m of investment was earmarked for new models and facilities in the UK in the first half of this year, compared with £647.4m in the same period in 2017.

Mr Khan also called for metro mayors across England to be given a greater voice in Brexit talks, similar to that of the devolved administrations.

The mayor said more devolution was needed for London and other English cities.

He said some of the powers and resources returned from Brussels after Brexit should be passed on to city authorities.

Mr Khan's comments came as the landmark Brexit legislation contained in the the European Union (Withdrawal) Act was given royal assent.

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