Brexit: The UK area that will see the biggest drop in wages

Prime Minister Boris Johnson greets EU Commission president Ursula von der Leyen ahead of a meeting in Downing Street, London.
Boris Johnson is pictured with EU Commission president Ursula von der Leyen. A report has found that Brexit is set to reduce household incomes as a result of a weaker pound (PA Images)

Brexit will reduce the future wages of workers across Britain, a think tank has said, as experts revealed which areas will be worst hit.

According to a report by the Resolution Foundation, in partnership with LSE, pay packets will be £470 lower per worker every year by 2030 compared to if the UK had remained in the EU.

The authors warned that the impacts of Brexit "will not be evenly spread across regions", with the North East expected to be worst affected.

The report, which looked into the immediate and future impacts of Brexit, found that households have seen an £870 increase to their cost of living as a result of leaving.

This is due to the depreciation of the pound in the immediate aftermath of the referendum, with sterling settling at more than 12% below its previous level a year after.

This has pushed up the price of imports, deepening inflation in the UK.

Uncertainty about trading terms also drove down business investment in the immediate aftermath of Brexit, the report warned.

The Resolution Foundation noted that worst-case scenarios predicted a cliff edge for UK exports to the EU have not materialised.

It comes as data revealed inflation has reached a 40-year high of 9.1% in the UK.

Prime Minister Boris Johnson signs the EU-UK Trade and Cooperation Agreement at 10 Downing Street, Westminster.
Boris Johnson hailed Brexit as the "dawn of a new era", but a damning new report has found it could hit people's pockets (PA)

How much will Brexit hit pay packets?

According to the study, people will see a drop in real pay of £470 per person per year on average by 2030.

The research estimated that labour productivity will be reduced by 1.3% by the end of the decade by the changes in trading rules alone, contributing to weaker wage growth.

The Resolution Foundation said the impact on wages will take time to emerge, as some trade barriers arising as a result of Brexit are yet to be introduced.

Wales and the North East will see the biggest percentage decline in wages (Resolution Foundation)
Wales and the North East will see the biggest percentage decline in wages (Resolution Foundation)

Workers in Wales and the North East are expected to experience the largest percentage cut to their wages.

In those areas, people will see a real pay fall of 2.2% and 2.1% respectively - amounting to an annual pay drop of £550 and £510 per person.

Those in London will experience the largest drop in gross pay, with wages declining by £750 per person, per year, a decline of 1.9%.

Fishing crews stage a protest in Teesport, Middlesbrough, near the mouth of the River Tees, demanding a new investigation into the mass deaths of crabs and lobsters in the area. They believe a 'dead zone' in North East inshore waters is killing marine life and
Communities in the North East will be facing the most cut to wages. Pictured are fisherman in in Teesport, Middlesbrough. (PA)

Which areas will be hit hardest by Brexit?

The North East is expected to be hit hardest by Brexit in terms of manufacturing output as its firms are particularly reliant on exports to the EU, the report said.

In comparison, London, Scotland and Northern Ireland are expected to outperform the rest of UK, and early evidence has suggested that London is adapting to Brexit faster than other regions.

London England City Scape
London is predicted to outperform the rest of the UK. (Getty)

Sophie Hale, principal economist at the Resolution Foundation, said: “Brexit represents the biggest change to Britain’s economic relationship with the rest of the world in half a century.

“This has led many to predict that it would cause a particularly big fall in exports to the EU, and fundamentally reshape Britain’s economy towards more manufacturing.

“The first of these has not come to pass, and the second looks unlikely to do so. Instead, Brexit has had a more diffuse impact by reducing the UK’s competitiveness and openness to trade with a wider range of countries. This will ultimately reduce productivity, and workers’ real wages too.

“Some sectors – including fisheries – still face significant change to come in the years ahead, but the overall services-led nature of the UK economy will remain largely unaffected.”