Study shows every area in UK will see economy hit from Brexit
Whether it’s a hard or soft Brexit, it’s looking grim for every area across the UK.
A new study analysing the impact of Brexit on every local authority in the UK found that every one of them will see a fall in economic output from the UK’s departure. That’s right, no area in the UK will see a positive impact on its economy from Brexit. It’s a pretty grim analysis. The research was conducted by the think tank Centre for Cities in conjunction with the Centre for Economic Performance (CEP) at the London School of Economics (LSE). You can see the full report at cep.lse.ac.uk.
The analysis looked at two Brexit scenarios: a soft Brexit and a hard Brexit. Under a soft Brexit, the researchers assume the UK agrees a free trade deal with the EU and whilst tariffs remain at zero, non-tariff barriers would increase the costs of trade. And under a hard Brexit, it’s assumed the UK falls back on WTO rules as no free trade deal is immediately agreed.
The study predicts that, on average, a hard Brexit will produce a 2.3% reduction in economic output whilst a soft Brexit will produce a 1.2% reduction. It’s clear from the results that a hard Brexit has the potential to do more damage with the economic impact being nearly twice as big than for a soft Brexit.
Maps of percentage decreases in local authority GVA (Gross Value Added)
The report shows the areas most negatively impacted by either scenario are those specialising in ‘knowledge-intensive sectors such as business and financial services’. This makes sense given the services sector will be hit most by non-tariff barriers, which both scenarios assume will be increased when the UK leaves the EU.
The top 10 cities most affected by a hard or soft Brexit were largely in the south-east of England with the exception of Aberdeen, which held the number one spot under both scenarios. The report concluded that although it was the most economically vibrant cities that would be hit hardest by Brexit, they are also the ‘best-placed to respond to the predicted shocks ahead’. It pointed to those areas having a large highly-skilled labour market as well as ‘significant numbers of innovative firms and strong business networks’.
In contrast, cities least directly impacted by a hard or soft Brexit may be ‘less well-equipped to respond to the economic shocks ahead’. These are areas seen as generally ‘less prosperous’ with a higher proportion of low-skilled workers as well as having a smaller knowledge-intensive services sector.
In a statement, CEP professor Stephen Machin said “a hard Brexit would amplify the negative impact of leaving the EU on local economies across the UK. Machin added that although richer local economies like London would be worse hit, a hard or soft Brexit would also hurt “poorer areas like Hull and Burnley that have some of the lowest incomes in the country”.
Government should seek a deal with trading arrangements as close to what we have as a member
Also commenting on the results, Centres for Cities chief executive Andrew Carter said “all UK cities face significant economic challenges after we leave the EU” and called on the government to “do all it can to minimise the coming economic shocks by securing the best possible trade deal with the EU”. Carter added this meant “ensuring our post-Brexit trading arrangements are as close to our current relationship with Europe as possible”.