Strong economic case for devolution says Deloitte chief economist Ian Stewart on visit to Yorkshire

There is a strong economic argument for devolution, according to a leading economist, as it provides more efficiency and leads to more appropriate allocation of resources.

Ian Stewart, chief economist at Deloitte. Pic: James Hardisty.

Ian Stewart, chief economist at professional services firm Deloitte, says that while GDP (gross domestic product) is measured on a national basis all economic activity is local.

He told The Yorkshire Post: “The differences in structure in the UK economy across regions in some respects are as big as differences countries within the European Union. For me there’s a good economic argument for devolution.”

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Mr Stewart also said there was a lot of value in intra-local infrastructure projects that provide regional connections.

The chief economist at Deloitte was visiting Yorkshire as part of a national tour where he will be speaking to businesses.

“Uncertainty about the economic outlook and about Brexit is tending to dampen investment and creating a mood of caution,” Mr Stewart said.

This uncertainty is partly to do with Brexit but also down to the state of the global economy.

Protectionist policies with the US slapping trade tariffs of Chinese goods have led to a marked slowdown in global growth.

Concerns amongst business leaders around trade protectionism and geopolitics have become much more acute, says Mr Stewart. He added: “We really depend on free and open trade. In all sorts of different ways, that liberal trading order has come under pressure in recent years.”

Despite free trade coming under pressure, Mr Stewart believes that the world isn’t heading towards rejecting globalisation outright.

“I don’t think we are seeing the end of globalisation,” he said. “What we are seeing is a slower period of globalisation.

“There are greater frictions in globalisation but I think the benefits of globalisation are just so enormous.”

Mr Stewart added: “We do have to accept that the pace of globalisation is not going to be as strong as we saw between the 70s and around about 2005.”

The Conservative Party has signalled the end of austerity. Mr Stewart said more public spending, whichever party it is under, is likely to be positive for growth.

Last year, Deloitte published a report on unlocking the potential of the UK’s regions. Infrastructure and skills were highlighted as two key issues for Yorkshire.

The possibility of a very Hard Brexit, where Britain crashes out of the European Union without a deal, according to Mr Stewart.

He said: “This Government has negotiated a deal and said if we’re elected we’ll implement it. The other parties would not countenance a no deal exit from the EU.

“If there was to be a Labour Government or a hung parliament, that would imply either a much closer economic relationship between the EU and the UK, with the UK leaving the EU, or a second referendum and the possibility of remaining.”

However, even if a deal is agreed and passed by parliament, it is unlikely to be the end of Brexit-related uncertainty. Mr Stewart said: “The Government would then have to negotiate new trading arrangements with the European Union. Those negotiations could conceivably extend to the end of 2022.”

The economist believes that businesses realise that Brexit uncertainity is unlikely to suddenly dissipate.