Region will be hit hard by economy shift, says report

BREXIT HAS MADE THE UK ‘LESS COMPETITIVE AND OPEN’

BREXIT has damaged Britain’s competitiveness, reducing productivity and workers’ real wages in the years ahead, according to a new study – and the North East is expected to take the hardest hit.

The Resolution Foundation said leaving the EU has reduced how open and competitive Britain’s economy is. The reliance of North East firm’s on exports to the EU means the region’s economy will suffer the most, it added.

The Foundation’s report, in collaboration with the London School of Economics, said the immediate impact of the referendum result has been clear, with a “depreciation-driven inflation spike” increasing the cost of living for households and seeing business investment falling. The UK has not seen the large relative decline in its exports to the EU many predicted, although imports from the EU have fallen more swiftly than those from the rest of the world, the study suggested.

The report said Britain has experienced a decline of 8% in trade openness – trade as a share of economic output – since 2019, losing market share across three of its largest non-EU goods import markets in 2021, the US, Canada and Japan. The full effect of the Trade and Cooperation Agreement will take years to be felt but the move towards a more closed economy, say the authors, will make the UK less competitive, which will reduce productivity and real wages.

The research estimated labour productivity will be reduced by 1.3% by the end of the decade by the changes in trading rules alone, contributing to weaker wage growth, with real pay set to be £470 per worker lower each year, on average, than it would otherwise have been. Output of our fishing industry is expected to decline by 30% and some workers will face “painful adjustments”, said the foundation.

Sophie Hale, principal economist at the Resolution Foundation, said: “Brexit represents the biggest change to Britain’s economic relationship with the rest of the world in half a century. This has led many to predict it would cause a particularly big fall in exports to the EU and fundamentally reshape Britain’s economy towards more manufacturing.

“The first of these has not come to pass and the second looks unlikely to do so. Instead, Brexit has had a more diffuse impact by reducing the UK’s competitiveness and openness to trade with a wider range of countries.

“This will ultimately reduce productivity and workers’ real wages too.”