May 31, 2020 6:50 AM

Severe economic disruption predicted in North West and Midlands if UK exits Brexit transition period without a deal, new Social Market Foundation report reveals

New local impact analysis shows the North West and Midlands will be severely exposed to a double economic hit from Brexit and coronavirus if the UK exits the Brexit transition period without a deal in place at the end of the year.

The report, entitled ‘Assessing the economic implications of coronavirus and Brexit’, has been released today ahead of the final round of UK-EU negotiations and before UK and EU leaders meet to discuss the progress of talks. It focuses on the impact of ending the Brexit transition period on 31st December 2020 in light of the current public health crisis.

 

 

The Social Market Foundation (SMF) report was commissioned by cross-party group Best for Britain. It examines, in the context of ‘U-shaped’ recovery from a coronavirus induced recession, the economic impact of both a new Free Trade Agreement and leaving the European Union without a trade deal. It seeks to provide an understanding of which sectors, regions and local areas in the UK will be most exposed to both supply-side shocks. Its main findings include:

  • If the UK leaves the EU without a deal in place on 31st December 2020, the manufacturing, banking, finance and insurance sectors would be severely exposed to a double economic hit from Brexit and coronavirus.
  • While London and the South of England would be highly exposed to the double economic hit caused by Brexit and coronavirus under an FTA, leaving the EU without a deal in place would create pockets of severe disruption across the country, and particularly in the North West and Midlands regions. 50% of local areas (NUTS3) in the North West are placed in Category 5 (the highest) and a further 40% in Category 4 for their exposure to a double economic hit based on the gross value added of sectors locally.
  • Analysis of local area impact based on employment shows there are 66 local areas in the most severe category of impact if the UK leaves the EU without a trade deal at the end of the year. One-sixth of these areas have more than a third of their labour market working in either manufacturing or finance, banking and insurance etc. (the two industries most impacted). Four of the 66 areas have more than 100,000 jobs in these two industries.
  • If the UK exits the transition period without a trade deal in place, it is likely that the Government would need to bring about a stimulus package to support specific industries and parts of the country. Given the large increase in government expenditure as a result of coronavirus it is hard to see how the UK could afford another stimulus package in early 2021 without adding to already unprecedented borrowing and potentially testing the patience of gilt buyers.

Best for Britain CEO Naomi Smith said:

“This report, which maps the impact of both shocks, definitively rebuts any speculation that the impact of leaving the transition period could be masked by the coronavirus recession. 

“The data is clear: when you scratch beneath the surface, so many key sectors will be exposed to a dangerous double whammy of economic hits. 

“When you map these findings onto the UK’s geography, it shows that particular areas of Britain, such as the North West and Midlands regions, will be disproportionately harmed. These include many former ‘red wall’ seats that switched from Labour to the Conservatives at the last election.

“With public debt spiralling, the Government is boxing itself into a fiscal corner unless it extends the transition period and secures a trade deal at the end of the ongoing negotiations.”

SMF Director James Kirkup said:

The evidence shows that both ending our close trading relationship with the EU and the measures taken to combat the coronavirus will have negative impacts on the UK economy as a whole.

In some cases and some places, that double impact will be severe. At base, this report demonstrates the simple fact that leaving a developed free-trade agreement with our nearest and largest trading partners at the same time as facing a pandemic will expose many local areas of the UK to a painful double economic impact.”

About the report

The full report, ‘Assessing the economic implications of coronavirus and Brexit’, can be downloaded here. You can find a methodological note for the report here.

The SMF report was commissioned by cross-party group Best For Britain. The SMF retained full editorial independence. The SMF, a registered charity, is committed to disclosing all its sources of funding.

Local areas in Category 5 of GVA impact under coronavirus and WTO terms

Local area

Region

Jobs in severely impacted sectors

Hartlepool and Stockton-on-Tees

North East (England)

25%

West Cumbria

North West (England)

28%

Manchester

North West (England)

25%

Greater Manchester South West

North West (England)

29%

Greater Manchester South East

North West (England)

30%

East Lancashire

North West (England)

30%

Chorley and West Lancashire

North West (England)

26%

Warrington

North West (England)

30%

Cheshire East

North West (England)

29%

Cheshire West and Chester

North West (England)

29%

Wirral

North West (England)

25%

York

Yorkshire and The Humber

23%

Leeds

Yorkshire and The Humber

29%

Calderdale and Kirklees

Yorkshire and The Humber

30%

Derby

East Midlands (England)

28%

South and West Derbyshire

East Midlands (England)

29%

West Northamptonshire

East Midlands (England)

34%

North Northamptonshire

East Midlands (England)

26%

Worcestershire

West Midlands (England)

27%

Telford and Wrekin

West Midlands (England)

29%

Birmingham

West Midlands (England)

27%

Solihull

West Midlands (England)

31%

Dudley

West Midlands (England)

26%

Peterborough

East of England

28%

Norwich and East Norfolk

East of England

24%

Luton

East of England

26%

Hertfordshire

East of England

27%

Central Bedfordshire

East of England

30%

Southend-on-Sea

East of England

34%

Essex Haven Gateway

East of England

27%

West Essex

East of England

34%

Heart of Essex

East of England

29%

Essex Thames Gateway

East of England

25%

Camden and City of London

London

39%

Westminster

London

41%

Wandsworth

London

39%

Tower Hamlets

London

34%

Haringey and Islington

London

27%

Lewisham and Southwark

London

28%

Bexley and Greenwich

London

28%

Redbridge and Waltham Forest

London

28%

Enfield

London

21%

Bromley

London

35%

Croydon

London

28%

Merton, Kingston upon Thames and Sutton

London

30%

Barnet

London

30%

Brent

London

30%

Ealing

London

28%

Harrow and Hillingdon

London

27%

Milton Keynes

South East (England)

28%

Buckinghamshire CC

South East (England)

31%

Brighton and Hove

South East (England)

26%

East Sussex CC

South East (England)

21%

West Surrey

South East (England)

30%

East Surrey

South East (England)

31%

West Sussex (South West)

South East (England)

21%

West Sussex (North East)

South East (England)

31%

South Hampshire

South East (England)

27%

Central Hampshire

South East (England)

27%

North Hampshire

South East (England)

26%

West Kent

South East (England)

27%

Bristol, City of

South West (England)

26%

Bath and North East Somerset, North Somerset and South Gloucestershire

South West (England)

26%

Gloucestershire

South West (England)

29%

Swindon

South West (England)

34%

Wiltshire

South West (England)

28%

Bournemouth and Poole

South West (England)

29%

Dorset CC

South West (England)

27%

City of Edinburgh

Scotland

25%

Ards and North Down

Northern Ireland

N/A

 Source: SMF analysis

Local areas in Category 5 of job impact under coronavirus and WTO terms

   

Jobs in manufacturing & banking finance

Name

Region

Number of jobs

Percentage of all jobs

Westminster

London

49,500

41%

Wandsworth

London

74,400

39%

Camden and City of London

London

52,800

39%

Kensington & Chelsea and Hammersmith & Fulham

London

61,700

38%

Bromley

London

58,800

35%

Lambeth

London

66,800

35%

West Northamptonshire

East Midlands (England)

68,200

34%

Tower Hamlets

London

57,100

34%

Southend-on-Sea

East of England

29,100

34%

Swindon

South West (England)

37,400

34%

West Essex

East of England

48,300

34%

Flintshire and Wrexham

Wales

43,100

31%

Buckinghamshire CC

South East (England)

80,700

31%

East Surrey

South East (England)

60,500

31%

Solihull

West Midlands (England)

29,900

31%

West Sussex (North East)

South East (England)

61,600

31%

Leicester

East Midlands (England)

51,200

31%

Merton, Kingston upon Thames and Sutton

London

93,200

30%

Warwickshire

West Midlands (England)

83,000

30%

Warrington

North West (England)

31,200

30%

Barnet

London

57,600

30%

West Surrey

South East (England)

118,400

30%

Calderdale and Kirklees

Yorkshire and The Humber

86,200

30%

Falkirk

Scotland

22,300

30%

Greater Manchester South East

North West (England)

70,700

30%

East Lancashire

North West (England)

43,400

30%

Central Bedfordshire

East of England

42,600

30%

Brent

London

46,800

30%

West Lothian

Scotland

26,600

29%

Kingston upon Hull, City of

Yorkshire and The Humber

35,000

29%

Cheshire East

North West (England)

53,000

29%

Greater Manchester South West

North West (England)

68,800

29%

Monmouthshire and Newport

Wales

31,700

29%

Bournemouth and Poole

South West (England)

50,200

29%

Gloucestershire

South West (England)

89,300

29%

Cheshire West and Chester

North West (England)

44,900

29%

Heart of Essex

East of England

44,200

29%

Leeds

Yorkshire and The Humber

109,000

29%

Hounslow and Richmond upon Thames

London

65,600

29%

Berkshire

South East (England)

131,100

29%

Peterborough

East of England

26,300

28%

Lewisham and Southwark

London

99,700

28%

Bexley and Greenwich

London

75,900

28%

Walsall

West Midlands (England)

34,300

28%

Milton Keynes

South East (England)

37,700

28%

Ealing

London

45,600

28%

East Merseyside

North West (England)

59,100

28%

South Nottinghamshire

East Midlands (England)

47,100

28%

Hackney and Newham

London

90,600

28%

Redbridge and Waltham Forest

London

78,500

28%

Croydon

London

52,100

28%

Wiltshire

South West (England)

63,200

28%

Hertfordshire

East of England

160,400

27%

Essex Haven Gateway

East of England

58,100

27%

West Kent

South East (England)

48,700

27%

Haringey and Islington

London

77,100

27%

Harrow and Hillingdon

London

67,000

27%

Swansea

Wales

28,600

27%

North Northamptonshire

East Midlands (England)

44,900

26%

Thurrock

East of England

22,200

26%

Brighton and Hove

South East (England)

40,900

26%

Luton

East of England

25,300

26%

Edinburgh, City of

Scotland

67,900

25%

Barking & Dagenham and Havering

London

53,900

25%

Essex Thames Gateway

East of England

43,700

25%

Manchester

North West (England)

64,000

25%

Source: SMF analysis

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