The European Single Market is a Myth

by Simon Gentry, Head of Public Affairs

I moved to Brussels in August 1990.  Everyone in the European Commission spoke French then.  The EU only had 12 member states.  Germany was just re-unifying. And the EC – as it was then – had just begun the great, visionary ‘1992’ project, intended to create a pan-Community, single market.  It was a bold and inspiring vision, a market to rival that of the United States.  Directives flew out of the Commission and we critiqued them on behalf of our clients; we made appropriate representations to Commission officials, winning some and losing others.

We realised that the Directives we were working on applied only to certain sectors.  Obviously you could not harmonise regulations for everything all at once.  It would take time and was a complicated process.  The Directives aimed to get the laws of the 12 member states into more or less the same shape and allow the market and the standards setting bodies to do the rest.  For many sectors, this has worked well.  There is a single market for cars,  fridges, dishwashers and cookers.  In fact, manufactured goods do actually enjoy a single market, as does food, more or less.  Of course we in Britain as well as our neighbours in Ireland choose to drive on the left, and we insist of our clunky fused plugs, but manufacturers of televisions know that they can produce the same thing, give or take, for consumers from Cork to Cyprus.

That is not true of services, however.  A car insurance policy cannot be sold cross-border; there are still 28 retail insurance markets.  There is no European contract law, of course, so all contract-based services still need to be delivered by someone appropriately qualified and accredited in the country where the service is being delivered.

In a Brexit context, politicians are simply wrong to talk about THE Single Market.  There isn’t one.  There are markets which are closer to being single, sectors where producers can create and sell their products across the EU – and they undoubtedly enjoy advantages from that.  But the fact is that businesses that provide services do not have a single market and face a welter of national regulations with which they must comply.

The British economy is made up overwhelmingly of services.  Somewhere between 80% and 85% of all economic activity in the UK takes place in the service sector and the dominance of services ticks up every year. The number is flattered by the size of the City, but nevertheless, the absence of a single market in services is of particular importance and disadvantage to us. Many of the things we are particularly good at cannot be sold across the EU.  We face national barriers, complicated national regulations and inconsistent applications of the rules that do exist.

Politicians discussing Brexit and the UK’s future relationship with the EU would do well to be more careful about the terms they use.  To say there is a single market is simply incorrect.  Many industries, retail financial services for instance where no single market exists, will not be directly affected by our departure from the EU (although the macro-economic climate will certainly impact them).  Other sectors do have a single market of course, and care needs to be taken of those in the negotiations, but given the structure of the British economy with the huge dominance of services, our departure from the ‘single market’, may have much less impact than many suppose.

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