By Raquel Ortega-Argilés
Our ESRC- Brexit priority grant: “What are the economic impacts of Brexit on the UK, its sectors, its cities and its regions” under the UK in a Changing Europe initiative aims to examine in detail the likely impacts of Brexit on the UK’s sectors, regions and cities by using the most detailed regional-national-international trade and competition datasets currently available anywhere in the world. These two datasets, namely the 2016 WIOD World Input-Output Database and the 2016 EU Interregional Trade Datasets developed respectively by University of Groningen and by the PBL Netherlands Environmental Assessment Agency. The quantitative research will allow us to understand the role in shaping UK regional trade behavior which is played by global value-chains, whereby goods and services crisscross borders multiple times before being finally consumed by household and firms. The UK is heavily integrated with the rest of the UE via such global value-chains and reshaping the future post-Brexit UK trade arrangements with the EU will also involve reconfiguring these global value-chains. Our data allows us to examine the impacts of different trade scenarios and to map out the sensitivity of UK sectors and regions to different post-Brexit scenarios. Brexit will also reshape the national and international competitiveness rankings of the UK regions and again our data allows us to examine the likely long run changes which will arise.
The findings of earlier related work (Los et al. 2017) suggest that the UK’s cities and regions which voted for Brexit are also the most economically dependent on EU markets for their prosperity and viability. This is a result of their differing sectoral and trade composition. Different impacts are likely for different sectors, and also different impacts are likely between sectors, and these relationships also differ across the country’s regions. Some sectors, some regions and some cities will be more sensitive and susceptible to any changes in UK-EU trade relations which may arise from Brexit than others and their long-run competiveness positions will be less robust and more vulnerable than others. This suggests that these sectoral and regional differences need to be very carefully taken into account in the context of the national UK-EU negotiations in order for the post-Brexit agreements to be politically, socially as well as economically sustainable across the country.
As well as differences in the regional industrial and trading structures, the economic impacts of Brexit on the UK’s sectors, regions and cities are also likely to be very different depending on three other issues, namely: (1) the nature of the UK’s post-Brexit trade agreements with both the EU and the WTO, including any transitional agreements with both organisations; (ii) the impacts of Brexit on both the national and regional competitive positioning including that of both the UK and the individual region’s competitor regions and (iii) the changes in local development policy and governance settings induced by leaving the EU. All four of these issues need to be examined in detail in order to identify the likely effects of Brexit on each sector, region and city, as well as the UK as a whole.
These issues are additionally complicated because of the combination of the UK’s large interregional inequalities and its highly centralized but partially devolving governance systems. Both the UK’s economic geography and its governance systems are already highly unbalanced and it is these large and growing interregional imbalances and inequalities which heavily constrain the UK’s overall national economic performance (McCann, 2016). Brexit
Is likely to have profound implications for the design and governance of UK city and regional development policies and the ongoing UK devolution agenda will be heavily affected by the changing external environment.
Our project will aim to identify the governance, policy and institutional options which key local actors perceive to offer the greatest possibilities for adjusting to the new realities. Participatory workshops with city, regional and national stakeholders will be organized in order to develop alternative post-Brexit scenarios for empirical analysis – as perceived by the city and regional as well as national institutions. The mix of quantitative and qualitative approaches will allow us to identify the impacts of Brexit at the crucial meso-levels of the individual sectors, the individual cities and the individual regions.
In the first paper son to come out of the project, we employ the EU interregional extensions to the World Input-Output Database WIOD in order to assess the Brexit trade-related risks exposure of EU regions and member states. We develop an index of Brexit trade-related risks which reflects all of the complex global value chain patterns evident in UK-EU trade. Our findings demonstrate that UK regions are far more exposed than regions in other countries. Only the Republic of Ireland faces exposure levels similar to UK regions while the next most affected regions are in Germany, The Netherlands, Belgium and France, in descending order. There is a significant imbalance in Brexit trade-related risks between the UK and the rest of Europe, and this imbalance may influence the outcomes of the negotiations between the UK and the EU.
Our research team is comprised of scholars from the UK and The Netherlands and our participatory quality research we will also take place alongside key UK partner organisations acting at the interface between academia and national and regional policy-making. This ensures that our academic outputs will also connect with broader public policy arenas at the very highest UK levels. The core project research consortium is composed by Prof. Raquel Ortega-Argilés (University of Birmingham), Prof. Philip McCann (University of Sheffield), Prof. Bart Los (University of Groningen), Dr. Mark Thissen (PBL Netherlands Environmental Assessment Agency) and Prof. Frank van Oort (Erasmus University Rotterdam and University of Utrecht). The project is supported by Centre for Cities, ResPublica, Policy Scotland, IPPR North and the Local Growth Analysis team at the Department for Business, Energy and Industrial Strategy (BEIS).
For additional information of the project, please visit: “What are the economic impacts of Brexit on the UK, its sectors, its cities and its regions”
Los, B., McCann, P., Springford, J., and Thissen, M., 2017, “The Mismatch between Local Voting and the Local Economic Consequences of Brexit”, Regional Studies, 51.5, 786-799
McCann, P., 2016, The UK Regional-National Economic Problem: Geography, Globalisation and Governance, Routledge, London