How Brexit will hit different UK regions and industries

Raquel Ortega-Argilés, University of Birmingham and Philip McCann, University of Sheffield

The very areas of the UK which voted Leave in June 2016 are likely to be the ones hardest hit by Brexit. Our research on the likely economic consequences of leaving the European Union on different regions and industries is consistent with the recently leaked government analysis which suggests that London will be one of the areas least hit in the event of a no-deal Brexit. The north-east of England, meanwhile, will be one of the worst affected.

An important element here is that these regions (and the sectors of the economy based there) have little representation in the Brexit negotiations and rarely figure in media discussions. When it comes to the potential impact of Brexit, the most prominent stories are those with underlying political or business interests. For example, the case for special treatment of particular industries after Brexit tends to revolve around financial services, automobile and aerospace firms.

On the one hand this is because these industries are widely understood as critical for the UK economy. But it’s worth noting that these industries also have strong lobbying power and access to government policymakers. In contrast, many other parts of the UK economy do not. Our analysis suggests that, in reality, it is many of the less high-profile sectors – and the regions where they are located – that could be the most exposed to Brexit.

London’s financial services sector will likely be better off than less high-profile industries.shutterstock.com

We examined the extent to which British industries depend on trade with the EU. On the basis of an analysis of global trade patterns across 43 countries and 54 industries, we were able to calculate a Brexit risk-exposure index.

We did this for each UK sector under a “no deal” Brexit scenario in which much of UK trade faces severe disruptions and impediments. We also put together a “hyper-competitive” scenario in which UK industries can rapidly adapt and mitigate against the effects of losing single market access.

In our analysis, an industry’s exposure to Brexit is defined by the extent it is dependent on products or services that cross a UK-EU border at least once. We calculated exposure levels for different industries. They indicate how much the industry has to restructure its supply chains and employees to mitigate against the losses caused by reduced post-Brexit trade and movement with the EU. This gives us a picture of which industries are likely to be hit hardest by a no-deal Brexit and which ones will most likely remain virtually unaffected.

Deal or no deal

Across the UK, the results for a no-deal Brexit scenario show: