The Economic Impacts on Brexit on the UK, its Regions, its Cities and its Sectors

The Economic Impacts of Brexit on the UK, its Sectors, its Cities and its Regions

What are the economic impacts of Brexit on the UK's sectors, regions and cities?

The findings from our recent research 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.

This project 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 (and the people who built these data). These two datasets, are the 2016 WIOD World Input-Output Database and the 2016 UK Interregional Trade Datasets developed respectively by the University of Groningen and by the PBL Netherlands Environmental Assessment Agency. WIOD covers 43 countries, 56 sectors and 15 years of trade-GDP-demand relationships, while the EU Interregional Tables covers 59 sectors and 240 EU regions. The quantitative research will allow us to understand the role in shaping UK regional trade behaviour 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 EU 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 competiveness rankings of the UK regions and again our data allows us to examine the likely long run changes which will arise.

At the same time, these changes will also all have profound implications for the design and governance of UK city and regional development policy logic and settings. However, the withdrawal of EU Cohesion Funds, alongside changing UK-EU trade relationships means that both the economic and the public policy environment facing local regions will shift significantly. The ongoing UK devolution agenda at the level of both the three devolved national administrations as well as the English city-regions will be heavily affected by the changing external environment and our project will identify the governance, policy and institutional options which key stakeholders perceive to offer the greatest possibilities for adjusting to the new realities. Our quantitative research will therefore also be undertaken in parallel with qualitative research based on key stakeholder engagement sessions. Participatory workshops with city, regional and national stakeholders will be organised 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 identity the impacts of Brexit at the crucial meso-levels of the individual sectors, the individual cities and the individual regions.

The pathways to impact of this project are built into the very logic of the project, which is designed as a co-learning project between the analytical team and stakeholders operating at the levels of UK cities and regions, as well as in central government. Our project is based heavily on interaction and engagement with key stakeholders, mixing qualitative arguments and insights with quantitative analyses. The beneficiaries of this project will be central government policy makers and trade negotiators, city-regional authorities and policy-makers, members of the devolved administrations, and advocacy organisations representing different UK industries and regions.

The project is designed to elicit the Brexit and post-Brexit ideas, views, concerns and opportunities of local actors as perceived from the vantage point of regional and city stakeholders. The workshops will be organised in conjunction with our institutional partners to ensure that the perspectives and views from the regions are embedded in both our national-sectoral and regional-sectoral analyses rights from the start of the project. The different ideas arising from the experience and priorities of the city and regional stakeholders will then be tested empirically. We will feedback the results of our analyses to the project participants to get their interpretations of our empirical findings, and then wherever possible the models will be re-run and re-estimated on the basis of their feedback.

The data at our disposal, which is the best currently available anywhere in the word, is not currently available to UK regional or city authorities, and even UK central government authorities at present do not have the detailed knowledge or experience skills to use the data. However, the participatory workshop participants, most of whom will be outside of the academic world, as well as the central and local government authorities, will be the key end users of both our interim and final project outputs. Our work therefore provides immediate benefits to different tiers of government and to institutional stakeholders across the UK governance system, as well as to private sector and civil society organisations involved in our workshops.

The impacts of the project will be generated via three major forms. Firstly, our data-based scenario-sensitivity trade-GDP analysis along with our trade-specialisation-competitiveness analysis will allow government central government analysts and trade-negotiators to understand the likely range of the expected GDP and local wage-income outcomes of their various proposals and choices across different UK sectors, regions and cities, as well as the longer term impacts on competiveness on different UK regions.

Secondly, we will be able to translate the complex empirical and analytical insights into diagrammatic and tabular formats which are amenable to policy makers and negotiators as well as to the wider public, without in any way compromising the quality of the analysis. This will help with discussions and scenario-building exercises, and also with the wider dissemination of the project findings to broader non-academic audiences.

Thirdly, the exchange of stakeholder ideas, insights and concerns, and the associated empirical analyses which are generated by the discussions in our participatory workshops, will facilitate a wider 'learning journey' whereby different industry and regional stakeholders will come to a greater understanding of the likely effects of Brexit on their communities and also their potential opportunities for traversing the likely changes to be engendered by Brexit.

By combining the best quantitative sources of evidence and analysis with the best qualitative sources of ideas, evidence and insights, we will be able to provide the most robust, detailed and extensive analysis of the likely impacts of Brexit on the UK's sectors, regions and cities.