From 1 January 2021, the UK will no longer be a member of the European Union. While the two sides are still negotiating to reach a trade agreement before the deadline, either outcome will have a significant impact on trade, employment, workforce and funding.
But the UK economy is not homogenous, and regional data shows that the impact of Brexit will differ significantly across the country. Areas and sectors that rely more on international trade will be hit harder, and some pre-existing geographical inequalities will be amplified.
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We aggregated employment, trade, population and funding statistics across hundreds of local authorities in Britain to identify which areas could be most impacted by Brexit.
This is, of course, a contentious subject. Some economists agree with our analysis that economic centres such as London will be less affected due to a reduced reliance on trade and a better ability to adapt thanks to more knowledge-based employment. But others have argued the opposite – that London and the south east will see the biggest negative impacts due to trade barriers affecting the export of services more than the export of goods.
What is not disputed is that Britain already has among the worst geographical inequalities in the developed world, and that these geographical divides have been widening. A number of studies found that if the UK economy is damaged by leaving the EU, this trend might accelerate still further. “Over the longer term, it is places that are already struggling that are likely to struggle the most,” notes one study.
Some industries are also broadly agreed to be more at risk than others. Official figures analysed by the New Statesman show that industries such as the motor trade, transport and hospitality have a high share of exports and imports to and from the EU, making them more vulnerable to fluctuations in trade with Europe – which will occur whether or not a deal is signed.
And many local economies have already felt the effects of an impending Brexit, even before the terms are known. Research from Warwick University found that most local authority districts – but especially those dependent on the manufacturing sector – had experienced a reduction in economic output by 2018. Our model deemed different areas of the UK at risk for different reasons. Corby, in Northamptonshire, has a large share of EU nationals, so it is more exposed to the risk that skilled workers will leave. For Cornwall, meanwhile, the risk is combined: a local industry is geared towards EU trade, and the area is one of the highest recipients of EU funds.
“Boris Johnson gave specific promises that there would be some kind of funding mechanism to replace EU funding,” says Charles Boney, the press officer for Cornwall for Europe, an organisation campaigning for closer ties with the EU. “In the short term, we will most likely only get 5 per cent of that.”
How we developed the index
Our Brexit vulnerability index is made up of local indicators across four different variables: employment, trade, population and EU funding.
To calculate an employment score, we looked at how jobs are distributed across different industries in each local authority and then at how much of the trade in each of those industries is with the EU. This gives us a rough estimate of the extent to which the jobs in each local authority are vulnerable to potential disruption in EU trade, though this approach will not account for many local labour market particularities.
For trade, we aggregated the total exports of goods and services for each NUTS3 statistical region in the UK – which may contain one or more local authorities – and worked out what share of those exports go to the EU. While more granular trade data is not available, this approach allows us to pinpoint the areas in which the local economy is most dependent on the European single market.
We calculated a population score by analysing the estimated percentage of EU nationals residing in each local authority, as well as the percentage of people aged 50 or over.
Our funding score is made by comparing the amount invested by the European Union in each local authority with its annual GVA. The bulk of the data we use comes from myeu.uk, and we’ve also added figures on the amounts received by UK beneficiaries under the Common Agricultural Policy in 2018 and 2019. While this information only covers a fraction of all EU funding projects, it shows that some regions in Britain rely on EU funding more than others.
For each of the four groups described, we indexed the scores on a scale of one to 100, so that one represents the least vulnerable local authority and 100 represents the most vulnerable. We then averaged these scores and indexed them once again.
The table below shows the indicators we used, and the data sources.
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