Areas that voted for Brexit ‘more exposed to its risks’
Regions that voted for Brexit such as west Wales and the Valleys are more exposed to the economic risks of Britain’s withdrawal from the European Union than those that voted to remain, a study has shown.
Researchers from the University of Birmingham’s Citi-Redi research institute have found the UK regions, particularly the regions that voted to leave the EU, are also much more exposed economically than any other areas of Europe.
In this latest analysis, which is part of a bigger research project funded by the ESRC, the researchers accounted for which shares of regional labour income and regional GDP are at risk as a consequence of future Brexit-related trade barriers.
The key findings of the paper include:
The UK regions are far more exposed than anywhere else in Europe, with regions in Ireland closely behind;
The UK regions which voted Leave are more exposed than those which voted Remain;
The UK is 4.6 times more exposed than the rest of the EU with the majority of EU countries facing almost no exposure at all, which means that in economic terms the UK is in a very weak bargaining position.
Results show that 2.64% of EU GDP is at risk because of Brexit trade-related consequences. In the UK, 12.2% of GDP is at risk from Brexit trade-related consequences.
The highest levels of regional GDP exposure to Brexit in the UK are found in many of the UK’s non-core regions in the Midlands and in the north of England.
But many parts of Wales are also at high risk of Brexit related consequences, with 11.7% of the country’s GDP exposed.
The exposure is higher in west Wales and the Valleys, where 30.5% of manufacturing and 23.6% of primary industries are exposed.
Wales voted 53% to 47% to leave in the June 2016 referendum, a higher margin than the UK as a whole.
Only five council areas in Wales voted to remain: Cardiff, Ceredigion, Monmouthshire, the Vale of Glamorgan and Gwynedd.
All council areas in the Valleys and in West Wales, apart from Ceredigion, as well as the local authorities in north-east Wales, voted to leave.
In some of the Valleys areas, the vote in favour of leaving was particularly high.
In Blaenau Gwent, it was 62.03% and in Torfaen, it was 59.78%.
The authors of the report say their figures show that the UK is far more dependent on a seamless and comprehensive free trade deal than the other EU states.
They write: “Mercantilist arguments popular in the UK media, which posit that the UK trade deficit with the rest of Europe implies that on economic grounds other EU member states will be eager to agree on a free trade deal with the UK, are not correct.”
They point out that the UK’s exposure to Brexit is 4.6 times greater than that of the other 27 member states together, and only in Ireland is there a similar level of regional exposure.
“As such, in all likelihood, the potential impacts of either no deal between the UK and the EU or a bad deal whereby the UK’s access to the Single Marker and the Customs Union is heavily curtailed, are far more damaging for the UK than the rest of the EU.”
Meanwhile, other research shows that the cost to the UK economy of the vote to leave has been a level of growth of around 0.9% lower than it otherwise might have been.
Fourteen different counterfactuals by the Financial Times and various research bodies gave a range of estimates of between 0.6% and 1.3% for the loss of GDP growth compared to what might have been expected.
It means the UK has lost around £18bn in annual growth, equivalent to losing £350m a week – the amount Leave campaigners claimed during the referendum campaign could be saved from Britain’s EU budget contributions and spent on the NHS instead.
The figure also suggests that the UK Government has lost around £9bn in tax revenue from the impact of the Brexit vote.