Brexit: Trade in Non-financial Services (EUC Report)

Lord Davies of Stamford Excerpts

Monday 18th December 2017 Lords Chamber

[Lord Davies of Stamford (Lab)]

My Lords, I congratulate my noble friend Lord Whitty and his colleagues on an excellent report. I believe, or certainly hope, that it will be a foundational document in the weeks and months to come as the Government prepare their negotiating case and as business decides how best to present its own case to government and to the European Commission.

A message comes out quite clearly from this report, shining out brilliantly from just about every page. It is very simple: it would be an absolute disaster for this country to leave the European Union. That is a fact. I realise that the noble Baroness who spoke earlier on, who announced that she was a Eurosceptic—she has that reputation in this House—was anxious to discount that obvious message of the report. She hit upon the most extraordinary way of doing it, by arguing that the reason why the report reflected this fear about the results of Brexit and concern about the results of Brexit for this industry was that a lot of evidence was taken from trade associations, which always like the status quo and do not like change. The absolute opposite is the case. Trade associations love government-induced change. It gives them enormous importance and a double role: they have to explain to their membership how things work and what the change exactly is, and most of all they have to defend their membership vis-à-vis the Government. That gives them a prominence and an importance, both in their own sector and possibly even more widely outside the sector, which they would not otherwise have—and for once their members are delighted to pay their annual subscription. So the noble Baroness got that one completely the wrong way round.

This is an important sector of industry, not least because it is very labour-intensive; it creates an awful lot of employment. People think that services create employment which is not highly remunerated, which is the case in tourism. However, there are certainly a large number of areas—prominent in this country—in the non-financial services sector that pay their people extremely well by international standards. One thinks of technology, media, accountancy, legal services, and consultancies of different kinds, such as management consultancy, and so forth. These are really big payers, and the economic importance of having these firms in this country is very great. Because of the technology and know-how involved in these firms, they are a considerable national asset that we should be trying to preserve and nurture—whereas I fear we are doing exactly the opposite.

I want to take one example. I believe that the technology consulting services company Accenture currently employs more than 300,000 people. Ten years ago it employed fewer than 30,000. That shows how employment has been created in the sector. Lord knows there are sectors where employment is falling, so it is very important that we have sectors such as this one which generate considerable employment. There are also spin-offs from big, successful companies such as Accenture. A lot of new businesses and small boutiques have grown out of Accenture or have been set up by people who started their career there, so it is a very dynamic and positive process and we do not want to bring that to an end.

The most important thing in the success of these labour-intensive companies is the quality of the manpower and womanpower that they possess—the talents, abilities and experience of their employees. That is absolutely key. To prove that, you have only to look at the balance sheet of a successful consultancy company and compare it with its market value if it is a listed company or if it is the subject of an acquisition when someone is paying the market value for it. Noble Lords will find that almost invariably the market value is a very considerable multiple of the balance sheet net worth of the company. That is not to say that such companies do not have any assets; they do, although they are mostly intangibles such as licences or patents of some kind or, most importantly, capitalised intellectual property such as software. Nevertheless, the value of the company will vastly exceed its net worth, and that good will reflects the value of the people who work there and their accumulated expertise.

Therefore, we are dealing with extremely sophisticated people who generate a great deal of value and want to employ only the brightest and the best. If you try to prevent them from doing that, they will move somewhere else where they can employ the brightest and the best. This illustrates the importance of freedom of movement. The Government’s wish to destroy freedom of movement, the price for which is keeping us out of the single market, is extremely dangerous.

I am delighted that the Prime Minister has apparently negotiated a satisfactory deal for the residents from other EU countries who currently work here, but she has not filled in the details of the regime that will apply to them. Will they have a personal right to live here indefinitely, even if they change their job or have no job and become unemployed? Will they be able to take time off to work elsewhere? Will they be able to undertake contracts that require them to spend a majority of months in a year outside the country on various assignments?

All those questions need to be answered, but an even more important question that needs to be answered is: what will be the regime for potential new recruits to British-based technology or other consultancy companies? It is vital that that is answered because individuals will not come here unless they have a promising regime under which they can live and work. For example, they will not come to work in this country if they would not be allowed to change their job here. This is a sector in which people change their jobs very frequently. If a good opportunity arises in another company, they want to be able to move. They do not want to be in the classic position of someone with a work permit who cannot change their job. They do not want to be unemployed for a while and have to leave the country. If people are unemployed in that sector, it is not usually because they are actually unemployed—that is, they are looking for a job but cannot get one or, for example, they have been fired. It is usually because they have a non-compete clause in their contract and they change their job and are then put on gardening leave for three, six or 12 months. What will the regime be for such EU citizens in this country going forward? It is very important that we get all these details rights.

I must say that I was not at all reassured when I heard the other day from the noble Lord, Lord Callanan—who is summing up this evening—that the Home Office is in the middle of drafting regulations for registration of this kind. I have yet to meet anybody in the Home Office who has any understanding of, let alone experience of, business; nor have I met anybody there with an understanding of economics. So I shall hold my breath until I see the regulations that are currently being drafted. However, it is extremely important that they are drafted in such a way that they do not have provisions for and protections against some obscure potential difficulty, and lots of phrases that lawyers like and so forth. At the end of the day, real risks and obstacles are created for people coming here and for British-based firms recruiting the best people, whom they need to survive in the future.