Services sector could take £27bn hit by 2030
British service sector exports could take a 35 billion US dollar hit (£27.9 billion) by 2030 if the UK loses access to the EU's single market or faces protectionist US trade policies following Donald Trump's presidency, a new report claims.
Research conducted by HSBC and Oxford Economics warns that service exports could be knocked 4% lower to around 860 billion US dollars (£686 billion) by 2030 if tariff and non-tariff barriers are introduced in the years ahead.
America's global trade partners are looking for signs that Mr Trump might back down from protectionist campaign rhetoric that could put international trade agreements at risk, while Britain's financial services industry anxiously awaits news over whether the UK will pursue a so-called hard Brexit.
It would see Britain give up tariff-free trade and EU passporting rights for financial services, in order to take control of immigration.
Service exports - which include financial services, legal advice and consulting, passenger airlines, and IT - already accounted for 44% of total UK exports in 2015 at 345 billion US dollars (£275 billion), compared to 30% in 2000.
The EU currently accounts for around 38% of total UK service exports.
But the potential hit to EU-bound service exports could be partially offset by greater trade with emerging economies and the US - assuming relations with America remain strong, the report said.
Barring trade disruptions, the report's base case projections are for service sector exports to surge to 895 billion US dollars (£714.5 billion) by 2030, as the industry reaps the benefits of technological advances and a growing middle class in emerging markets like India which will help increase demand.
Markets like India are set to be part of the 10 fastest growing export destinations for the UK in the long term.
Dan Howlett, HSBC's UK head of corporate banking, said: "That's not to play down the importance of the EU as a trading partner.
"But I do feel that over time, with technology helping to assist things, and the fact that we feel there will be a material pickup in consumer spending in those emerging economies, we feel that's going to put our services sector in very good shape."
Among the top five service exporters, the UK is one of the only countries set to gain market share by 2030, rising from 7.1% in 2015 to 7.2%.
That is compared to America's project loss of market share from 15.6% to 13.2% , France's drop from 5% to 4.6%, and Germany's reduction from 5.3% to 4.8%.
China is the only other top exporter expect to gain a bigger slice of the services export market, rising 5.9% to 6.6% by 2030.
Mr Howlett said that the UK is already particularly competitive in a number of service sectors including legal advice.
"Legal services is a good example, where it may not be a huge part of UK GDP - at just under 2% - but the reality is that the UK legal market is far more international, for example, than the US legal market."
He also highlighted the strength of the consulting industry and education, and said he was confident the UK would remain a leader in financial services.
"It's an important part of our international revenues ... I don't see that changing."