Trade in Services Report

Conclusion and Cross-Sector Policy Implications

8.1 Conclusion

Our analysis reinforces that Scotland’s services-export challenge is no longer of capability or demand, but primarily of market access, regulatory frictions, and institutional alignment.

Across professional and business services, life sciences, technology, creative industries and energy-related services, firms consistently report that post EU exit trade barriers are not episodic or transitional but structural, cumulative, and firm-specific. These barriers manifest less through headline tariffs and more through recognition regimes, mobility constraints, data governance, procurement eligibility, and duplicated compliance costs. For many Scottish firms, particularly SMEs and scale-ups, the issue is not the absence of overseas opportunity but the rising fixed cost of converting opportunity into revenue or making the difficult decision to leave Scotland to conduct economic activity.

Also, current statistical frameworks has the potential of overstating Scotland’s international services competitiveness by conflating domestic UK trade with true export capacity. While intra-UK services flows are economically meaningful and helpful to determine the level of sectoral integration, they do not substitute for international market access when firms face actual constraints in the EU, North America, or fast-growing third markets that came up in our roundtable meetings. As a result, headline services export performance can appear resilient even as firm-level international engagement becomes narrower, more concentrated, and more risk-averse.

The evidence suggests that left unaddressed, these frictions will bias Scotland’s services economy towards domestically anchored, lower growth activity, undermining ambitions around productivity, export diversification, and the scaling of high value services. The policy response therefore needs to combine the right level of resource allocation towards export promotion as well as reducing the effective cost of exporting services. A focus on former without the latter will fail to capture the true potential of Scottish service sectors.

Export promotion is equivalent to building more on ramps to a motorway, while services trade barriers determine whether the motorway itself is congested, fragmented, or intermittently closed. Adding on ramps without fixing the road simply increases frustration and wasted effort. Growth comes from capacity and flow as well as access point

8.2 Policy Recommendations

First, Scottish trade policy should place regulatory access and recognition at the centre of services strategy. This includes systematically identifying priority professions, subsectors and service activities where mutual recognition, equivalence, or regulatory cooperation would deliver the highest marginal gains for Scottish firms. Rather than broad-based agreements, the evidence points to the value of narrow, sector specific accords that reduce duplicative licensing, auditing, or professional accreditation requirements.

From our roundtable discussions, it became clear that regulatory access and recognition cannot happen without engagement from regulatory bodies. To that extent, both Scottish as well as UK Government should seek to empower the regulatory bodies in the nations as bilateral and multilateral convergence and cooperation agreements can only take place by support of the actual “on the ground” regulatory body. While governments across the world control trade policy, it is the regulators that control market access in services.

It’s also important for regulatory bodies in Scotland, and UK to develop relationships with counterparts in growth markets proactively. This should be seen akin to physical infrastructure. Government trade policy, by its design, tends to be reactive and seeks to address trade barriers after they appear. However, many growth markets mentioned at the roundtables are just getting started in their economic journey which provides a window of opportunity where UK based regulatory and industry bodies can develop meaningful^[59] relationships with their counterparts to ensure that trade barriers don’t appear at the first place.

Second, professional mobility constraints require targeted mitigation. Short term business mobility rules, visa thresholds, and occupational eligibility lists increasingly shape whether services exports are commercially possible. Scotland should intensify efforts to influence UK level mobility negotiations while simultaneously developing practical firm level support, such as shared compliance services, advisory hubs, and pooled legal resources that lower the cost of navigating fragmented regimes. Our evidence also suggests that firms don’t have same understanding of mobility requirements, activity that can or cannot be conducted and hence natural risk aversion which prevents service activity from taking place, or extra incurring of compliance costs when none were theoretically required.

Third, the focus of trade support should be reoriented from promotion to problem solving. Firms consistently report that market intelligence and trade missions while useful need to go hand in hand with assistance with regulatory interpretation, data localisation rules, procurement eligibility, and contract enforceability. This argues for deeper integration between trade teams, regulators, and sector bodies, with a focus on resolving concrete barriers faced by exporting firms rather than a singular focus on increasing the volume of promotional activity. Evidence from our roundtables again shows that there is a need for “all hands on the deck” approach – including Scottish Enterprise as well as UK Export Finance as expanding footprint overseas is ultimately a financial decision that is fraught with risks during best of times.

Fourth, Scotland’s services trade evidence base needs refinement. Distinguishing clearly between domestic UK services flows and international exports is essential for policy credibility and prioritisation. Developing supplementary indicators that track firm level international exposure, regulatory costs, and market entry success rates would provide a more accurate picture of Scotland’s external competitiveness and help target interventions where they are most effective.

Finally, services trade policy should be more explicitly linked to Scotland’s wider economic objectives. Net-zero ambitions, life sciences scale up, and digital transformation including adoption of artificial intelligence all depend on the ability of Scottish firms to export complex services alongside goods and intellectual property. Addressing services trade barriers is therefore not a peripheral trade issue, but a core condition for delivering productivity growth, inward investment leverage, and long-term economic resilience. The roundtables were clear that immigration policy, electricity prices, success of manufacturing are not separate elements and are all needed to flourish for a flourishing services sector. While these elements go beyond traditional trade policy, they are a necessary condition for a services sector to truly flourish and remain resilient through economic cycles.

To conclude, Scotland’s services sector remains internationally capable but increasingly constrained. A shift from generic export encouragement to targeted barrier reduction, regulatory engagement, and evidence led prioritisation will be critical if services are to play the role envisaged in Scotland’s future growth and trade strategy.