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27/07/2017

Brexit will hit southern UK cities hardest – report

Words: Laura Edgar
UK / Shutterstock: 104845301

Cities that are successful and have large high-skilled service sectors, mainly located in the south of England, will be hit the hardest by Brexit, whether it is ‘hard’ or ‘soft’.

A report by think tank Centre for Cities and the Centre for Economic Performance (CEP) at the London School of Economics (LSE) also says these cities are better placed to adapt to the economic shocks ahead compared with less affluent places that are less directly affected by Brexit.

The report considers the impact both a soft and hard Brexit might have on British cities in the 10 years following new trade arrangements with the EU being implemented.

Researchers say a hard Brexit would bring an average reduction of 2.3 per cent in economic input across all UK cities compared with a soft Brexit, which would result in a 1.2 per cent decrease.

Whether the UK gets a hard or soft Brexit, the report suggests, cities that are doing economically well – predominantly in the south of England – would be hit the most directly and the hardest.

The two organisations say this reflects the fact that these cities specialise in knowledge-intensive sectors such as businesses and financial services. The study suggests that such firms would be the most affected by the increase in tariff and non-tariff barriers that Brexit could bring.

Aberdeen, Worthing, Reading, Swindon, Slough, Aldershot and Edinburgh will be affected the most whether it is a hard or soft Brexit. If it is hard, London, Leeds, and Ipswich are also in the top 10, whereas if it is soft, Gloucester, Northampton and Middlesbrough are in the top 10 to be affected.

The most-affected cities are, however, those best placed to respond to the shocks ahead, says the report.

The cities that are predicted to be less directly affected by either a hard or soft Brexit – the North, Midlands and Wales – are those credited with driving the vote to leave the EU. These cities have low numbers of high-skilled workers and smaller knowledge-intensive private sectors. This means they are less vulnerable to a potential post-Brexit downturn yet less equipped to deal with any economic shocks.

The cities that could be less affected by a hard Brexit include Crawley, Barnsley, Hull, Telford and Swansea, while those that could be less affected by a soft Brexit include Oxford, Wakefield, Basildon and Luton.

Andrew Carter, chief executive at Centre for Cities, said: “Contrary to much of the received wisdom on Brexit, it is the most prosperous UK cities which will be hit hardest by the downturn ahead – but poorer places across the North and Midlands will find it tougher to adapt.

“First and foremost, the government should do all it can to minimise the coming economic shocks by securing the best possible trade deal with the EU. That means ensuring that our post-Brexit trading arrangements are as close to our current relationship with Europe as possible.”

He also said the government should use its industrial strategy to give cities across the country the investment, powers and responsibilities they need to make their economies as successful and competitive as possible.

“This will be crucial in helping cities to respond to the changing economic circumstances as we leave the EU, and to address the other big challenges they face in the coming years such as globalisation and automation.”

* In the research, a soft Brexit is defined as a scenario in which the UK joins a free trade area with the EU, while hard means the UK and EU don’t have a free trade area and the default trade position is to trade under World Trade Organisation rules.

Image credit | Shutterstock

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