Hard Brexit could cost Wales staggering £1.1bn – warning
WALES could lose out by £1.1bn if Britain pursues a hard Brexit, top economists have forecast.
Experts from the London School of Economics have worked out the impact of both a soft and hard Brexit on every authority in UK.
Their research found that every local authority would be negatively affected under either scenario, but concluded that the economic impact of leaving the single market and customs union would be around twice as severe as a milder Brexit.
The academics said they were surprised that the additional cost of a hard Brexit was significantly higher in some areas than others – and cited the nature of industry and employment in those areas as the reason.
Across the UK, the worst affected authority by a hard Brexit would be the City of London which they estimated would lose around 4.3% of its Gross Value Added (GVA) – a measure of economic activity.
Areas that were most likely to vote remain are those that are predicted to be worst hit by either form of Brexit all across the UK.
In Wales, Cardiff would be the worst affected authority by either form of Brexit and would face a 1.3% hit by a soft Brexit or a 2.5% hit from a hard Brexit.
That is equivalent to stripping £117.21m out of the economy or
£225.40m in the hard Brexit scenario favoured by Prime Minister Theresa May.
In total, based on 2015 GVA figures, Wales would take an annual economic hit of £627m from a soft Brexit or £1.1bn from a hard Brexit.
Labour AM for Mid and West Wales Eluned Morgan, a former MEP, said: “This breakdown shows that Brexit will have consequences for every single county in Wales.
“People need to understand that they will pay a high price for the vote that took place last year and we should do all in our power to soften the blow by ensuring we have as full an access as possible to the single market.
“What’s clear is that the harder Brexit, the harder the impact on our communities. It’s imperative that we push for a softer Brexit and make sure we can still export our goods from Wales.
“These are staggering figures and when you think people fell for the lies about the NHS getting £350m a week and then you juxtapose that with the reality of the way communities will be hit in Wales, it’s worth reflecting on whether people are still committed to following through on what was a very negative referendum and one where people were blinded to the impact that it would have”.
In Wales, cities would lose out more than non-urban areas.
Newport, which faces a 2.1% hit to its GVA from a hard Brexit, Swansea at 2%, Gwynedd at 2%, RCT at 2.1%, Bridgend at 2.1%, and Vale of Glamorgan at 2.3%, would all be particularly hard hit and see millions stripped out of the economy.
The London-based academics suggested it was the equivalent of households losing nearly £2,000 a year.
Anglesey is one of the 10 least affected areas across the UK with a predicted 0.6% reduction in its GVA from a soft Brexit or a 1.1% hit from a hard Brexit, the equivalent of £5.6m or £10.3m a year.
Anthony Hunt, Welsh Local Government Association spokesman for finance, said that the figures should act as a wake-up call to Ministers.
“These are very worrying and it should be a wake up call to the Government.
“Many in the Brexit campaign said that all the money we had would come back to Wales if we left the EU. These figures show the huge impact it would have on the Welsh economy”.
He said that local authorities in Wales are already facing huge cuts in their grants from Government, any further cuts will leave them in an impossible position.
“Our grant from Government is being cut year on year but demand for our services is going up. This is another pressure we could do without.
“A lot of jobs and work here comes from European money. If that money doesn’t come, we have a choice to make as Local Government. Do we not do things we have been doing or do we carry on and take money from somewhere else?
“There isn’t much money going round at the minute, if we carry on doing something that was previously funded by European money we’ll have to stop something else.
“That is the unfortunate reality of Brexit. Government needs to get a grip and come out with a strategy”.
“In the area I represent, Torfaen, we are very dependant on tariff free trade with Europe.
“If that comes to an end, the jobs and money in our local economy are in danger”.
The LSE research is based on different scenarios.
Under the soft Brexit scenario, it is assumed tariffs remain at zero but non-tariff barriers increase.
Tariffs remaining at zero would happen if the UK joins a free trade area with the EU.
Non-tariff barriers are the costs arising from customs checks, border controls, differences in product market regulations, legal barriers and other transactions costs that make cross-border business more difficult.
Even free trade areas cannot eliminate all the non-tariff barriers that businesses face when transacting across borders.
Under the hard Brexit scenario, the UK and the EU are not part of a free trade agreement and so they must charge each other the tariffs that they charge to other members of the World Trade Organization. This means that goods crossing the UK-EU border are faced with WTO Most-Favoured-Nation tariffs.