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House of Commons Hansard
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Balance of Trade: Services
15 March 2016
Volume 607
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5. What estimate he has made of the UK’s balance of trade in services. [904089]

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The balance of trade in services has increased from a surplus of £54.3 billion in 2010 to a surplus of £88.7 billion in 2015.

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The Secretary of State’s answer highlights the fact that, while exports in goods are vital, especially to manufacturing cities such as Gloucester, our surplus in services might be more vulnerable if we leave Europe. What assessment has he made of sectors such as insurance and investment managers, whose businesses are passported across Europe, and other service sectors, such as advertisers, accountants, animators, designers and film producers?

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My hon. Friend speaks with experience: he is a distinguished former pension fund manager—a very important service that the UK industry provides. He is right that the EU’s financial services passport means that financial services firms authorised in the UK can provide their services across the EU, without the need for further authorisations. That is, of course, a significant benefit that they receive. Services represent almost 80% of our economy, and access to the world’s largest single market helps them to create thousands of British jobs.

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The Secretary of State must know that however good the growth in services exported from this country is—and we all applaud it—it must go hand in hand with an increase in manufacturing. Is he not worried that Syngenta—one of our leading agritech companies—will be taken over by ChemChina, backed by the Chinese Government? What will that do for our competitiveness and our supply chains? Why will he not meet a cross-party group of MPs that has begged to meet him?

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Of course the hon. Gentleman is right about the importance of manufacturing in our economy, which is why it has increased in terms of output, employment and value since 2010. The company he mentions, Syngenta, has itself said that there should be no change in its footprint in terms of employment—in fact, we expect that to increase. Also, when it comes to foreign investment in British industry, I see that as a vote of confidence. Since companies such as Jaguar Land Rover have received foreign investment, employment has gone up threefold, and that is great for British manufacturing.

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Our strong performance in services is still not enough to offset the difficulties we are having with our trade with the European Union, with which we now have an annual trade deficit of £62 billion. Given that non-EU trade exports have increased by 30% since 2010, is not it clear that the best future for this country is to be outside the European Union, so that we can negotiate free trade agreements with China, India, Brazil, the Commonwealth and the rest of the world?

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I agree with my hon. Friend that it is clear that trade agreements can lead to more trade with those countries and reduce any other barriers. Through the EU we have access to over 50 trade agreements at the moment, whereas other countries such as the US or China have 14-odd trade agreements. I agree that we need to focus a lot more on trade, but the trade agreements to which we have access today are very valuable in terms of global trade, not just with the EU.

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Is the Secretary of State aware that productivity in our flagship service industry—financial services—has fallen behind similar productivity in the United States, in France, and even in Italy? Can he explain that? Is it something to do with the regulations that his Government have imposed on financial services?

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I am not sure whether it is to do with regulations, because all the other markets that the hon. Gentleman mentions have also had to look at regulations after the financial crisis. However, he rightly highlights a general productivity problem across British industry in all sectors, where we are some 25 points behind with our G7 competitors. That is why we have a productivity plan, working with industry to turn that around.