Wales will be among hardest hit by Brexit price rises, says report
REGIONS outside London are at risk of taking the worst hit from rising prices and Wales is particularly vulnerable because so much of the nation’s exports go to the EU, a leading think tank warns today.
The IPPR’s report lands as Prime Minister Theresa May seeks to secure unity among her cabinet on a vision for Britain’s future relationship with the EU.
A big concern is that transport costs will increase if the price of vehicles rise, and this is likely to make up a larger part of household spending for families outside London.
The IPPR estimates that while the average “basket” of goods and services bought by a household will go up by 2.7% in London if there is a “hard” Brexit, but in Wales by 3.1%.
There are particular concerns about Wales. The IPPR reports that Wales and the North East have the “highest EU goods exports relative to the size of their economies” of anywhere in the UK.
It reports that in west Wales and the Valleys 86% of food and live animal exports go to the EU.
The report, written by Senior Research Fellow Marley Morris, states: “East Wales has the highest share of EU exports in machinery and transport equipment, given it contains a number of major European export hubs, such as Toyota’s Deeside car engine plant and Airbus’s Broughton aerospace manufacturing site.”
In a further warning about financial trouble that could be on the horizon, the report claims: “Regions and nations outside of London are also more likely to be hit by an increase in prices due to new trade barriers (as well as by the post-referendum rise in inflation due to the depreciation of sterling).”
In contrast, “London and the South East are likely to be more resilient to a Brexit-related economic shock”.
Mr Morris argues that the “best hope for a progressive Brexit [is] broad alignment with the different aspects of the single market, in order to limit the potential economic impacts.”
He notes that “while Brexit may not increase inequality, it is likely to put greater pressure on people in poorer income groups, who spend a larger proportion of their income and have less in savings”.
The think tank wants to see a “shared market” created by the UK and the EU which could consist of “regulatory alignment with the single market alongside a comprehensive customs union with the EU”.
It states: “The UK would have the option to diverge from single market rules over time, which would result in corresponding and proportionate restrictions in market access.”
The IPPR concludes that government decisions will determine what impact Brexit has on inequality.
It states: “If the Government chooses to respond to a potentially weaker fiscal position by reducing spending, this could further widen inequalities. On the other hand, if the Government takes steps to protect vulnerable regions and industries from the risks of Brexit, or to compensate them for any negative effects, then the consequences for inequality could be positive...
“The impacts of Brexit on inequality are far from pre-ordained and could be transformed by government intervention...
“[Many] have argued that it was in part the deep and sustained inequalities in the UK that precipitated the decision to leave the EU in 2016. Two years on, as the Government prepares for Brexit, it is critical that it secures a final settlement which serves to tackle these inequalities, rather than entrench them further.”
Plaid Cymru Brexit spokesman Hywel Williams, MP for Arfon, said: “The real impact of the Westminster parties’ needlessly hard Brexit is beginning to manifest itself across the UK and as this report shows – more so in Wales than the other UK countries.
“Families are already £900 a year poorer than they would have been had the referendum result gone the other way, and if we follow the policies of both Theresa May and Jeremy Corbyn in leaving the single market and customs union, we will fall significantly further behind as the cost of living soars.”