A lot of my time at work is given over to worrying fitfully about two things. One is cities policy. The other is Brexit.
What could be more thrilling, then, than a report which combines those two topics into a single piece of research? The answer, as it turns out, is almost anything, because this report is one of the most depressing things I’ve seen in ages.
The study, a joint effort between the Centre for Cities and LSE’s Centre for Economic Performance, looks at what both “Hard” and “Soft” Brexit would do to the economies of 62 British cities. (In the unlikely event you’re unsure, “soft” Brexit means we stay in a free trade area with the EU, but have to content with new non-tariff barriers; “hard” Brexit means we leave the free trade area and have to deal with tariffs as well.)
In either scenario, literally every city loses out. Only two cities – Crawley and Barnsley; neither exactly an economic powerhouse – would lose less than 1 per cent of GVA, a measure of productivity, even in the softer scenario.
The vast majority of cities will lose between 1 and 1.5 per cent of GVA under the Soft Brexit scenario. Worst affected would be Aberdeen, heart of the Scottish petrochemical industry which would lose 2.1 per cent. That’s about as much productivity as the UK as gained in its lost decade since 2006.
And this, remember, is in the gentler scenario. Should we have a Hard Brexit – the plan the British government seems to favour – the impact will be twice as bad, and vast majority of cities will be losing between 2 and 3 per cent of GVA.
Aberdeen, once again the hardest hit, would lose 3.7 per cent. Indeed, the ranking of cities doesn’t change much between soft and hard Brexit: seven cities make the top 10 under either scenario; seven more make the bottom 10. A harder Brexit will take a deeper gouge out of the British economy, but won’t change which cities are the worst afflicted.
Much of the debate around Brexit has had a “turkeys voting for Christmas” subtext to it: a suggestion that the areas that voted Leave would be those most likely to take a hit.
The CfC/CEP report shows that the picture is rather more nuanced than that. In both scenarios, the report says:
“...it is economically vibrant cities - predominantly in the South of England - which will be hit hardest and most directly by Brexit... In contrast, the cities least directly affected by either form of Brexit are mostly less prosperous places in the North, Midlands and Wales.”
That implies a couple of things. One is that it wasn’t turkeys voting for Christmas at all: by and large, those cities with the most to lose from Brexit were actually more likely to vote against it. The other is that, since it’ll be the richer cities which are hit hardest, the aggregate effect of Brexit might actually be worse than a simple average suggests.
That, though, is only the short term effect. The report also makes clear that the most affected cities are also the most resilient, and so the best-placed to respond to the shock. Poorer cities may be less vulnerable to the post-Brexit downturn; but they’ll also find it harder to bounce back.
Oh – and then there’s the matter of EU regional funds, which go overwhelmingly to poorer, more pro-Brexit areas, and which are incredibly unlikely to be replaced by the British government. But that’s another story.
Here’s a chart showing the predicted reduction in GVA in every city in the report (blue is under soft Brexit, red and blue combined is Hard Brexit). I’ve grouped them by region, to enable you to see how different parts of the country will be affected.
Click to expand.
Andrew Carter, the CfC’s chief executive, called on the government to “secure the best possible trade deal with the EU”:
“That means ensuring that our post-Brexit trading arrangements are as close to our current relationship with Europe as possible.”
“But it’s also critical that the government uses its forthcoming industrial strategy to give cities across the country the investment, powers and responsibilities they need to make their economies as successful and competitive as possible.”
Such a move would make sense: cities must be given as many tools as possible to deal with the shocks ahead. The fear, though, must be that Brexit will take up so much of the government’s time that devolution policy is basically off the table. Even if ministers still want to empower their cities – by no means certain, when you look at the rest of Theresa May’s agenda – it’s by no means clear that they have the capacity to do it.
You can read the full report here.