Some of the UK’s most deprived regions are at risk of a “double-whammy hit” to their economies in the event of a no-deal Brexit, a new report warns.
An analysis of regional performance by manufacturing group Make UK and business advisory firm BDO highlights the exposure of those regions with a high dependence on EU exports.
They are already suffering losses, but are likely to be most at risk from leaving the EU without a deal, said the report.
Yorkshire, Wales, and the North East have a very high exposure to trade with the EU, so the risks of no-deal are likely to be felt disproportionately by these areas, it warned.
The East Midlands is also at risk, with manufacturing accounting for almost a fifth of its economy and the EU being its biggest market, accounting for just over half its exports.
Overall, Yorkshire manufacturers have remained in a healthy position despite the global downturn and uncertain political environment, with output over the period the second highest of any UK region, it said.
It added that manufacturing remains central to the success of the Yorkshire economy, with the contribution of the sector to regional output overall firmly above the UK average and worth £17.6bn in the last year.
June Smith, director of member engagement for Make UK in the North of England, said: “There are well documented challenges going forward, not least those facing the automotive and construction supply chains and the global economic downturn. Furthermore, the outcome of Brexit has the potential to have an impact on the future performance of manufacturers in Yorkshire & Humber given the region’s exposure to it as a major export market.
“Despite this, those companies who invest and innovate will still have the best long term prospects and can contribute to raising the productivity performance of the region and the UK as a whole.”
Steve Talbot, head of manufacturing at BDO in Yorkshire and Humber, added: “Whilst the performance of manufacturers in Yorkshire and Humber gives reason to be optimistic, the survey demonstrates the disproportionate impact a no-deal Brexit could have on the UK regions where the majority of trade is within the EU. With Yorkshire being the English region most reliant on EU exporting, there is a risk that future growth will slow significantly.
“Companies are already holding back on investment as a result of the prolonged period of Brexit instability and risk lagging behind their global competitors when it comes to the uptake of industry 4.0 processes and technology. It will be difficult for many manufacturers to regain lost ground in these areas particularly as digital transformation picks up pace.
“The region’s contribution to the overall UK economy should not be underestimated.”
According to Make UK, given Wales and the North East both contain some of the most economically disadvantaged areas of the UK, a hard Brexit is likely to prove especially damaging for these areas.
Ongoing difficulties in the automotive sector are having an “ominous” impact on manufacturing and those regions most closely linked to the industry, such as the West Midlands and the North East, said the report.
Stephen Phipson, chief executive of Make UK, said: “There are some regions of the UK with a very high exposure to trade with the EU and who are likely to suffer a disproportionate double whammy to their economies and jobs from a damaging no-deal exit.”