Brexit means that UK exporters of services now face more red tape and fewer opportunities.

A central vision of proponents of Brexit was that unshackled from the rules and regulations of Brussels, the UK would forge new trade deals, reconnect with fast-growing markets and recharge its historical comparative advantages in sectors such as finance, law, education and life sciences - the backbone of its modern services-driven economy.

We have assessed what Brexit has meant for the ability of UK businesses to export their services abroad. The short answer? Services exporters now face higher trading costs, more red tape and fewer opportunities. The country remains a services powerhouse, but services exports have been underperforming due to Brexit barriers. What's more, the promised "Global Britain" pivot to markets beyond the European Union has not materialised.

Services account for around 80% of UK GDP and over half of all UK exports. Tradable services have been key drivers of economic growth. Yet the impact of Brexit on services has received far less attention than the impact on goods. This is partly because barriers to trade in services are less tangible than those for goods: there are no queues at Dover when a services deal collapses.

Measuring the unseen: Brexit barriers to services trade

Barriers to services trade don't show up as taxes or duties or tariffs that are easy to quantify. Rather, they come from divergent national rules and regulations - differences that deep trade agreements seek to overcome through provisions such as common rules or regulatory equivalence. To understand how Brexit has affected UK services, we need to measure these regulatory barriers.

We have built a novel dataset that captures the barriers from Brexit at a granular level - looking at country-service pairs to determine which UK services exports are affected and by how much. Barriers include restrictions such as Germany requiring lawyers to have European Economic Area or Swiss qualifications to provide certain legal services.

Far from unleashing the UK's global services potential, Brexit has slowed it down

With a comprehensive set of barriers, we can track how export patterns changed before and after Brexit. Growth of UK's worldwide services exports has slowed and diverged substantially from growth of other exporters in the most affected services (see the left-hand panel of Figure 1), while the least affected services have performed much more similarly to other exporters (right-hand panel of Figure 1).

One of the key political arguments for Brexit was that the UK could shift its focus globally and gain in world markets. Yet worldwide UK exports have underperformed by 4% to 5% in value - around £19.3bn to £24.1bn annually.

Figure 1: Growth in services exports of the UK and the world, by intensity of Brexit barriers

A substantial hit to EU services exports

Next, we dig deeper by doing a like-for-like comparison of UK exports to EU for a service and time with exports of the same service at the same time for other exporter-importer pairs in our data.

Figure 2: Event study for relative effects of Brexit barriers

Figure 2 shows the growth in UK services exports to the EU, with barriers (in red) or without barriers (in black). Growth was highly similar to that of other countries' exports or those of the UK to countries outside the EU, before 2020, just prior to the post-Brexit trading rules coming into effect. After the barriers from the new arrangements went up in 2021, UK exports in services where there were Brexit barriers slowed much more sharply.

Relative to bilateral exports that were not affected by the Brexit barriers, on average, Brexit barriers reduced UK exports of affected services to an EU country that imposes such barriers by 16%.

Global effects

Brexit could also have knock-on effects on how the UK trades with the rest of the world. UK businesses might struggle more globally - or they might pivot and grow elsewhere.

We find these spillover effects to be very small. Whether measuring them directly or adjusting our methodology to remove UK exports to non-EU countries as the reference group for comparison, the story was broadly the same - the UK's global services exports dropped by about 4% to 5% after Brexit.

Germany requires lawyers to have EEA or Swiss qualifications to provide certain legal services

Another notable finding is that barriers to cross-border investment matter just as much as barriers to trade. Many services - especially in finance, life sciences and professional services - are delivered through foreign affiliates, branches or partnerships. Investment frictions have also had significant negative consequences for exports.

A cautionary tale of deglobalisation

Beyond the UK, our study offers a broader lesson: deglobalisation has real economic costs, especially for advanced economies. The idea that regulatory sovereignty and global openness can go hand-in-hand is appealing - but it is difficult to achieve.

Far from unleashing the UK's global services potential, Brexit has slowed it down. Untying that knot will require not just new deals, but a new approach to international engagement - one which recognises that global competitiveness requires resolving complex regulatory frictions that can only be reduced through trust and cooperation among trade partners.

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21 October 2025     Paper Number CEPCP714

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This CentrePiece article is published under the centre's Trade programme.

This publication comes under the following theme: Global firms, Brexit, Trade Policy and barriers to international economic integration