Several parts of the UK that voted to leave the European Union are among the most vulnerable to the economic impact of Brexit, according to new research published as the UK government prepares to trigger article 50.
Researchers at the thinktank Demos studied regional differences in the reliance on exports to the EU, use of European workers and receipt of support grants. It found that Wales, the north-east and east Midlands all showed relatively heavy dependence, despite being home to a preponderance of leave voters.
The UK government hopes to soften the impact of leaving the single market by striking a new free trade agreement, but with EU negotiators insisting that the UK first settle the terms of its divorce settlement , there are growing fears that it will instead crash out of the union without a deal.
In this scenario, exporters would be forced to rely on World Trade Organisation (WTO) terms, which include punitive tariffs for many agricultural products and manufactured goods such as cars. The three regions that rely most on European markets are Wales, which sends 67 per cent of its exports to the EU, the north-east at 62 per cent, and Yorkshire and Humberside at 55 per cent.
The exercise also assumed that regional support funds from Brussels and easy access to European labour would disappear after Brexit, both factors with a disproportionate impact on certain regions.
“Despite overwhelmingly voting in favour of leaving the European Union, Wales stands to be the region worst hit by the UK’s departure from the EU,” concluded the Demos report. “Wales is also one of the UK’s two leading exporters to the European Union, with over 60 per cent of its exports going to the EU, and so would be most affected by potential tariffs.”
Not one-way
The correlation is not entirely one-way. Demos also found that leading remain parts of the country such as London and Northern Ireland would be among the hardest hit, while leave-voting areas such as the West Midlands, north-west and south-west would be less affected.
None of the 12 regions studied recorded anything less than a medium risk of harm in one of the three categories, though Scotland – which voted heavily in favour of remaining – was among those with the least to fear.
Researchers admit that the exercise can only provide a partial glimpse into what might happen due the large uncertainty over the course of negotiations. They were also unable to quantify the likely impact on service sector exports, which are not covered by WTO rules, and would see further pain heaped on regions such as London.
Nonetheless, the regional analysis was supported by a separate exercise that looked at the impact on particular industrial sectors. “With tariffs imposed on British goods at the levels currently faced by non-EU states, industries at risk of being hit by the highest duties will be agriculture, forestries and fishing; mining and quarrying; and manufacturing,” it said.
“As a result of tariff changes, UK producers of dairy products, confectionery, alcohol and tobacco will be hit with the costliest duties, with the highest tariffs of exports into the EU at 33.5 per cent for dairy produce.”
With Wales in particular facing the possibility of extremely high barriers on the export of lamb to Europe as well as a dependency on EU grants that is nearly three times higher than any other part of the country, the Demos research points to a high economic price for its decision to back Brexit.
– Guardian