Local Economic Effects of Brexit

Abstract

This paper studies local economic impacts of the increases in trade barriers associated with Brexit. Predictions of the local impact of Brexit are presented under two different scenarios, soft and hard Brexit, which are developed from a structural trade model. Average effects are predicted to be negative under both scenarios, and to be more negative under hard Brexit. The spatial variation in negative shocks across areas is higher in the latter case as some local areas are particularly specialised in sectors that are predicted to be badly hit by hard Brexit. Areas in the South of England, and urban areas, are harder hit by Brexit under both scenarios. Again, this pattern is explained by sector specialisation. Finally, the areas that were most likely to vote remain are those that are predicted to be most negatively impacted by Brexit. Acknowledgements and DisclaimerThanks to Rui Costa, Nikhil Datta, Josh De Lyon and Hanwei Huang for excellent research assistance. This paper provides further methodological detail and additional discussion of results first published in the CEP Brexit report by Dhingra, Machin and Overman (2017) and summarised in Clayton and Overman (2017). We thank Naomi Clayton and other researchers at the Centre for Cities for their help in producing those earlier reports.

Exploring Brexit with dynamic spatial panel models: some possible outcomes for employment across the EU regions

“…Overall, the simulations suggest that the biggest Brexit impact on UK regions will occur in the richer South East and urban areas, which is in line with work from LSE based on GVA, which shows that 'areas in the South of England, and urban areas, are harder hit by Brexit...the areas that were most likely to vote remain are those that are predicted to be most negatively impacted by Brexit' (Dhingra et al 2017b). This interpretation is in direct contrast to other work which maintains that 'the regions which voted Leave also tended to be more dependent on Europe for their prosperity than the regions which voted Remain ' (Los et al 2017).…”

Socio‐political fracturing: Inequality, stalled social mobility and electoral outcomes

“…Socially, those in the middle and lower strata of the income distribution are expected to find social mobility becomes increasingly restricted as further increases in inequality reduce the ability of parents with the fewest resources to support their children relative to those with the greatest resources (Resolution Foundation, ). Exacerbating the effects of inherited disadvantage, the places where vote to leave the EU was highest are likely to also be the places where the impacts of Brexit will be most acutely felt: the old industrial areas of England and Wales that have borne the brunt of economic restructuring as international multinationals increasingly plied their trades, but also where the greatest investments have been made by the European Union (Dhingra et al., ).…”

Geographies of Brexit and its aftermath: voting in England at the 2016 referendum and the 2017 general election

“…The split between cosmopolitan London and the rest of England remains a major issue challenging the Conservative government -which won only 40 of the 158 seats in the three northern regions in 2017 (plus only 21 of the 73 in London). Claims for greater infrastructural investment outside London and for more devolution of powers to regional bodies illustrate the spatial tensions, which may well be exacerbated after the UK leaves the EU in 2019 because many parts of those 'northern regions' that supported Brexit were major beneficiaries from EU investments and depended extensively on exporting to EU markets (Dhingra et al, 2017;Los et al, 2017). And those voters who have not benefited substantially from the liberal globalisation policies of recent decades, many of whom suffered more than average from the post-2007 crash recession and were prepared to vote for UKIP in 2014 and 2015 and then Brexit in 2016 (Scotto et al, 2018), were attracted back to Labour in 2017 F o r P e e r R e v i e w O n l y by a combination of its anti-austerity policies and the Conservative manifesto's attacks on some central welfare state provisions.…”