20/06/17

Red tape is damaging Britain's growth, says OECD

The world's richest economies must do more to tear down trade barriers in services that ramp up costs for consumers and businesses, according to the Organisation for Economic Co-operation and Development, reports The Telegraph.

The OECD said restrictions to services trade, which encompasses a wide range of sectors including banking, accounting, telecoms and insurance, had created costs for businesses that "largely exceeded" average tariffs on goods.

While restrictions differed by country and sector, the OECD said red tape across services markets added an average tariff equivalent of 40pc for exporters seeking to enter multiple markets.

The costs of services trade and investment barriers are high, largely exceeding the average tariff on traded goods

In some sectors regulatory barriers had even higher costs.

"For instance, the average level of restrictions in force in the telecommunications sector amounts to trade costs of up to 150pc on cross-border exports," the OECD said in a report on trade policies in services.

Prices in the transport, logistics and construction sectors were estimated to be about 20pc higher on average than they would be in the absence of restrictions, according to the OECD.

"The costs of services trade and investment barriers are high, largely exceeding the average tariff on traded goods, and these costs apply to all modes of supplying services abroad," it said.

The services sector has become an increasing driver of growth and employment in advanced economies, accounting for almost 80pc of UK output.

Boris Johnson says he is sure that Theresa May can pull off free trade deals

Data published by the Office for National Statistics show the share of jobs accounted for by the services sector increased from 63.2pc in 1978 to 83.6pc at the end of last year.

Angel Gurría, the OECD's secretary general, urged economies to do more to liberalise trade in services to raise productivity and living standards.

"Open and well-regulated services markets are the gateway to global value chains,” he said.

The OECD said trade costs arose "both from policies that explicitly target foreign suppliers, and more generally from domestic regulation falling short of best practice in the area of competition and rule-making".

Mr Gurria said smaller businesses had the most to gain from slashing red tape.

He said: "Services trade policy reform can boost small and medium-sized enterprises, reduce trade costs, strengthen the digital economy and help make globalisation work for all."

The OECD research also showed the importance for UK policymakers to nurture the country's services sector as it prepares to leave the European Union.

Data showed that that while productivity in UK manufacturing lagged behind other advanced economies including France and Germany, productivity in services was higher in Britain.

While Britain's banking and insurance sector remains less productive than in France and Germany, the UK was judged to be more productive in professional services and transport.

It was also deemed to be one of the most open economies in legal services, air transport and broadcasting, and more open than the OECD average in all sectors apart from architecture.

Recent OECD research suggests progress in harmonising services rules to make doing business easier has been slow.

An OECD report published last year showed progress towards deepening Europe's single market had "stalled" as policymakers dragged their heels on reforms, including scrapping red tape and reducing trade barriers.