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At 11pm tonight Britain will leave the EU. In doing this the country will, for the first time in almost 50 years, be able to strike trade deals with the rest of the world. Irrespective of the much debated merits or demerits of Brexit, the Government has pledged to use this as an opportunity to ‘level up’ the economy. But to do this, what kind of trade deals should the Government be looking to strike? And where in the world should it be looking for new customers.
Looking at data on who cities trade with the world gives three key insights:
1. The EU is the biggest market for every city bar none
Telford is the city that has the EU as its largest customer – an estimated 70 per cent of its exports in 2017 went to an EU country. And there is a wide geographical spread to the rest of the top ten cities by share of EU exports. York and Wakefield in Yorkshire are in second and third position, and Blackburn in the North West, Sunderland and Middlesbrough in the North East, Bristol in the South West and Luton and Milton Keynes in the South East all figure in the top ten as well.
Aberdeen sent the least to EU markets. But at 30 per cent of all exports, this was still higher than second placed USA (11 per cent).
While this of course is a static picture, to make up even a 10 per cent drop in current levels of UK cities’ exports to the EU would require more than a doubling in trade with China or increasing trade with the USA by nearly a third. Getting a good deal with the EU needs to be the main aim of any trade policy.
2. A trade deal covering selected goods only will only benefit a handful of places
Many high profile sectors, such as the car industry, are concentrated in a small number of places. For example, striking a deal on cars would benefit Coventry and Sunderland, and deliver a tangible political win, but it would do little for many other cities where there are few jobs related to the car industry.
For most cities, their exports are generated by a range of industries. In total 28 cities had less than one-fifth of their exports concentrated in one industry. Wigan was the city that had the most diversified export base, with its top exporting industry accounting for just 8 per cent of exports.
It will be important to ensure that places that are heavily reliant on one industry are considered and supported, but given that large parts of the export base are spread across the country, negotiators should consider how they can reach an agreement for all goods and services to support UK cities to continue exporting to the EU and beyond.
3. Some cities don’t trade much at all, and this harms their economies
While Derby sold over £46,000 of goods and services to the rest of the world in 2017, this was around nine times higher than Wigan, Exeter and Birkenhead. For these latter cities the issue is not what the likely impact of a trade deal may be, but instead is how to increase the amount they export.
The challenge for them is to understand why they haven’t attracted many exporting companies to locate within them, and they should look at the fundamentals that their economies offer to exporting businesses. Chief amongst this is to look at the skills of the residents that live in and around the cities, as well as the commercial space offering. Cities should be more cautious in putting schemes in place aiming to get existing businesses to export more. While there may be something that can be done, the bigger issue is likely to be a lack of export-focussed businesses, rather than the underperformance of existing businesses.
You can read more on the geography of exports in our briefing How do cities trade with the world?
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