A study by Centre for Cities think tank has found that Britain’s cities export the majority of their services to the EU, presenting economic disadvantages to a goods-only customs arrangement.
Cities produce over three quarters (77%) of Britain’s total service exports, and over half (56%) of these go to the EU. London and Edinburgh and Cardiff are among the largest exporters of services to the EU.
Policymakers should consider the impact that a goods-only customs arrangement would have on cities whose economies currently benefit from a frictionless trade relationship in services.
|Not likely to be covered by customs arrangements:
10 cities with the largest share of service exports going to the EU
|Rank||City||Share of all exports that are service exports to the EU, 2017 (%)|
Although not without disadvantages, a goods-only customs arrangement would however offer greater certainty to cities that export large amounts of goods to the EU. Sunderland (home to Nissan’s UK factory) Derby (Rolls Royce) and Slough (Mars) would all benefit from continued tariff-free trade.
|Likely to be covered by a customs arrangement:
10 cities with the largest share of goods exports going to the EU
|Rank||City||Share of all exports that are goods exports to the EU, 2017 (%)|
The EU remains the largest export market for every British city. Almost one-third of cities send over half of their exports to the bloc.
All cities would, therefore, benefit from a future relationship that maintains open trading arrangements with the EU in both goods and services.
Opportunities for trade beyond the EU
Looking beyond the EU, the report identifies the cities that are most aligned towards global trade. Derby leads, with 23% of its exports going to the USA and 12% to the Commonwealth. Meanwhile, 17% of Aberdeen’s exports are destined for China. These cities look set to benefit most from free trade deals outside the EU if future arrangements allow for them.
However, besides the US and China, no one individual country is a significant destination for any UK city’s exports.
|Dependence on foreign markets: selected destinations|
|Destination||Most reliant city||Share of total exports (goods and services) from that city, 2017 (%)|
Cities export three times more to the EU than they do to the USA and 20 times more than they do to China. To mitigate the impact of a 10% drop in EU trade, British cities would need to double trade with China or increase trade with the USA by one third.
The report’s findings make clear that, in terms of the economic success of the UK’s cities, policymakers should:
Commenting on the findings, Centre for Cities’ Chief Executive Andrew Carter, said:
“A goods-only customs arrangement would leave services, which comprise the majority of Britain’s exports to the EU, facing trade barriers. This scenario could limit the economic prosperity of many of Britain’s cities, and the millions of people living and working in them.
“Looking ahead to the future relationship, policymakers should work to ensure that EU trade in both goods and services is as frictionless as possible, while also retaining the ability of businesses to access global talent.
“Policymakers working on global trade opportunities should also be mindful of the reality that, besides the US and China, no single country currently provides any British city with a significant export market.”