More countries adopting technology and switching to remote working after the Covid-19 pandemic will drive a $2 trillion (£1.5 trillion) surge in trade in services over the next five years, according to new analysis.
Oxford Economics and Western Union modelled what effect coronavirus will have on cross-border trade, projecting that international trade in services will rise 31pc from $6.1 trillion last year to $8 trillion by 2025.
The US, France and the UK are set to see the largest increases in the value of cross-border trade in services over the next five years, the study said. In Britain, total services exports are expected to jump by $104bn, primarily driven by a boom in “digitally-deliverable services”, such as IT and financial services.
Already in the UK, services are a dominant part of the economy, thanks to the country’s role as a leading financial and business services hub.
However, they could become more key in the coming years, as economies become increasingly reliant on “online” services.
It is a trend which has been accelerated by the pandemic, with a survey from the Centre for Economics & Business Research (CEBR) last month estimating that around a third of Brits will be working from home on any one day in 2021, a huge jump from a tenth of staff in 2019.
However, while many businesses have sought to digitise more of their operations, in the short-term at least, the pandemic has hammered international trade, limiting air travel and hurting consumer demand.
This year, the report said the value of cross-border trade in both goods and services is expected to take a hit.
Trade in industries such as IT and financial services will prove “comparatively resilient” during the crisis, slipping around 6pc, as opposed to goods trade which is expected to fall 13pc.
This echoes figures from IHS Markit’s purchasing managers’ index last week which suggested British service industry firms were seeing some improvements in demand.
The PMI hit a five-year high of 56.5 in July, up from 47.1 in June, sparking hopes that the UK could be in line for a “V-shaped recovery”. The eurozone saw similar growth, recording services PMI of 54.7. Anything above 50 signals growth.
Western Union and Oxford Economics said global services exports should be back up to pre-crisis levels by the middle of 2021.
Andrew Summerill, the president of payments at Western Union, said: “The pandemic has already super-charged the growth in digital services and highlighted the potential for remote services to transcend global borders.
“Over the next decade, we’re going to see swathes of new business models redefine the possibilities for cross-border transactions, and in the short-term global trade in services will be a vital component of recovery and it will be digitally focused industries that will be the driving force.”
