The UK’s post-Brexit trade deals have contained world-leading digital trade provisions but significant barriers remain, according to a new report that will be published on 6 September by the City of London Corporation.

The report, The Practical Implications of Digital FTA Provisions on the UK Financial Services Sector, finds that while barriers to digital trade are on the rise across the globe, the UK has succeeded in securing modern and forward looking digital trade provisions through its free trade agreements (FTAs) with Australia, Japan, New Zealand, and its digital economy agreement with Singapore. These are designed to facilitate cross-border flows of financial data.

Digital trade is vital for the UK financial services sector which comprises 10% of the UK economy, contributes over £75bn in taxes and is a key engine of growth both across the UK and around the world. The UK is already the second largest net-exporter of financial services, exporting £82bn in 2020, and the ability to transfer data around the world allows financial firms to serve their customers and clients more efficiently.

Despite the UK’s progress, the report found that provisions included in the FTAs are significantly undermined by a lack of government and regulator buy-in in practice, and a litany of carve-outs and exceptions.

Going forward the report urges the Government to strengthen digital trade provisions in future trade agreements by:

·         Involving financial regulators in defining negotiation terms and objectives.

·         Building regulatory processes around specific concrete commitments. New and existing FTAs should be supplemented by other trade policy tools such as joint regulator-to-regulator memorandums of understanding (MoU), which provide for closer cooperation between the regulators and greater ability to share information between the markets.

·         Including a formal mechanism for firms to escalate complaints.

·         Prioritising data adequacy. The UK should prioritise data adequacy agreements with like-minded partners that UK regulators recognise have high standards of personal data protection. The agreements would allow for personal data to flow more freely between the UK and covered third parties, facilitating the transfer of financial data.

 The City of London Corporation will be hosting a conference, The Future of Digital Services Trade, on 6 September in partnership with HSBC, techUK, Flint Global, Freshfields Bruckhaus Deringer and TheCityUK. 

The conference will explore how digital provisions within FTAs can create new global standards on digital trade, setting a standard benchmark that limits the use of data localisation and enables trusted data flows for like-minded countries to base future agreements on.

Policy Chairman of the City of London Corporation, Chris Hayward, said:

“As the UK writes a new chapter in long trading history, we have an opportunity to set the agenda on digital trade and the flow of data. This issue is vital for our financial services exports and by default to our customers and clients around the world. Firms’ ability to sell services internationally is also a key engine of jobs, growth and investment. 

“While the UK has made great progress so far, there is scope to ensure digital trade commitments deliver more tangible benefits. We hope the next Prime Minister and his or her Government will seize these opportunities during ongoing trade negotiations with India, Canada, Mexico and others.”

Partner at Flint Global and co-author of the report Sam Lowe, said:

“The UK is well-positioned to be a global leader on digital trade. But as our research demonstrates, new trade and digital agreements will not create new commercial opportunities for financial firms so long as domestic regulators can easily invoke national security, public policy, or prudential concerns to wriggle out of trade commitments.

“New potential deals with the Gulf, Israel, India and others offer an opportunity for the government to further refine its approach to digital trade, by increasing regulator involvement and responsibility, narrowing the scope of carve-outs and exceptions, introducing formal mechanisms to allow firms to hold governments to account when in breach of their digital obligations, and increasing its efforts to facilitate the cross-border flow of personal data.”

Sally Jones, Deputy Chair of the Professional & Business Services Council, said:

“Never has digital trade been more important – whether as a means of enabling remote provision, with all the corresponding environmental advantages of reduced travel, or ensuring the safety and security of users’ data, or making trade more efficient.  Every organisation needs to get to grips with what digital trade means and how to harness its power.”

Notes to editors

About the City of London Corporation

The City of London Corporation is the governing body of the Square Mile dedicated to a vibrant and thriving City, supporting a diverse and sustainable London within a globally-successful UK. www.cityoflondon.gov.uk