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Several recently-published reports on the economic impact of Brexit reach the same conclusion: all of the various scenarios for a future relationship between the UK and the EU are likely to lead to a decline in the UK’s GDP over the following years.
The analyses (produced, respectively, by the National Institute of Economic and Social Research, The UK in a Changing Europe, and the Institute for Government) have much in common. However, only the Government’s study takes any form of geographical perspective, examining how the impact of Brexit might vary across different UK regions, given the disparate spatial concentration of certain industries.
You can listen to the podcast here, but as a taster, here are the key issues covered by the discussion:
Places that have been struggling over the past 20 to 30 years won’t become more attractive as a result of Brexit, as there are broader economic issues that these cities will need to address irrespective of the UK being in or out of the EU.
Brexit can, in part, be seen as a culmination of seeds sown in the 1970s and 1980s, when industrial decline in some places was not mitigated by a set of policies aimed at preparing them for the 21st century. These places have since been able to create a lot of jobs – some impressively so – but the nature of these jobs has been low skilled. This has fuelled a sense of these places being left behind as a result of globalisation despite the increase in the number of jobs available.
Naomi agrees that a lot of the problems that cities face long predate Brexit, and these issues will be exacerbated by the UK’s departure from the EU. This is partly because cities will effectively have to do more with less as a result of a likely post-Brexit squeeze on government revenues and spending.
The pronounced spatial variation seen in the UK’s productivity is strongly related to the skills of the workforce in different places. Divides along geographical lines are likely to keep widening, unless educational deficits are addressed, especially in early years education.
However, adult education and lifelong learning must also be taken into account, as Naomi points out, as the vast majority of the workforce in 2030 will have already been through compulsory education by that point.
Even though we know that a skilled workforce is central to economic success, the importance of skills development and education are often under-appreciated, whereas, as Paul argues, the economic contributions of transport and infrastructure are sometimes over-emphasised.
Naomi meanwhile emphasises that, while investment in skills tends to take a longer time to show results than improving transport links – and is also less tangible and visible than the latter – it is likely to have direct benefits for residents, such as reducing workless-ness.
Migration from the EU to Britain will substantially lessen after Brexit. This will affect cities more than the rest of the country, and may lead to further skills shortages, as migrants tend to be more highly skilled than the resident population.
The hope here is that curbing Britain’s migrant labour force will lead to shortages being filled domestically, with people being drawn in from across the UK, and greater investment being made in upskilling the domestic labour force.
Naomi underlines how unlikely this is, however, pointing out that since the 2016 referendum there has been a significant drop in business investment in workforce development, a trend Brexit would likely exacerbate, not curb.
Geography matters here, as not all cities have benefitted from the inflow of high-skilled labour to the same extent. London and the Greater South East have seen a higher level of in-migration and are therefore likely to feel the effect of Brexit more sharply. However, other cities, particularly those in the North of England which have high percentages of working-age people without higher qualifications, have not seen a similarly significant level of EU in-migration. While they are therefore not as vulnerable to a slump in EU migration, they are also less likely to see the replacement of external migrants with domestic labour post-Brexit.
Another possible impact of Brexit on cities is a shift of power away from Westminster to cities and city regions. The Brexit vote can be seen as a reaction to growing disillusionment with an external governing actor, and a demand to ‘take back control’ over domestic issues. To what degree – and to what level of government – this ‘taking back’ should occur, however, is a grey area.
Paul and Naomi argue that this is particularly important in relation to the Shared Prosperity Fund, which will be replacing EU funding following Brexit. Through the fund, city leaders might gain greater flexibility to invest in their local economies in ways that genuinely reflect local circumstances. This control and flexibility for local leaders, Paul argues, will be an important part of any discussion on devolution going forward.
Hear our panel discuss this topic in more detail.Listen here
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