UK regions most exposed to no-deal Brexit also most deprived, warns study

A health check of Britain’s manufacturers has shown thatsome of the most economically and socially deprived areas in UK are highly exposed to the impact of a no-deal Brexit.

Exporters are already suffering losses, especially in Wales, north-east England, Yorkshire and Humberside, which have a significant exposure to trade with the EU, according to a report by manufacturing trade body Make UK and business advisory firm BDO.

The East Midlands is also at risk, with manufacturing accounting for almost a fifth of its economy. The EU is its biggest market, accounting for just over half its exports.

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. The report also warned that the US-China trade war was affecting domestic manufacturing.

A hard Brexit would take Britain out of the EU’s single market and customs union and ends its obligations to respect the four freedoms, make big EU budget payments and accept the jurisdiction of the ECJ: what Brexiters mean by “taking back control” of Britain’s borders, laws and money. It would mean a return of trade tariffs, depending on what (if any) FTA was agreed. See our full Brexit phrasebook.

Stephen Phipson, the chief executive of Make UK, said: “Although Brexit stockpiling put manufacturing on steroids for a little while, the industry has since gone almost cold turkey and the overall picture over the last year now shows Brexit, global trade wars and the economic downturn in major markets are menacing UK manufacturers.

“In particular, 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.”

Last week, the Resolution Foundation said ministers would need to find at least £60bn to protect families and compensate businesses damaged by the dramatic fall in trade that is expected should the UK quit the EU without a deal on 31 October.

Official figures have show that manufacturers last month recorded the sharpest drop in factory output for seven years following a sharp decline in new orders.

Ongoing difficulties in the automotive sector are having an “ominous” impact on manufacturing and regions most closely linked to the industry, such as the West Midlands and the north-east, can expect to see further declines, according to the report.

Tom Lawton, of BDO, said: “The long-term uncertainties around Brexit, minimal progress on the government’s industrial strategy, technological disruption, skills shortages and heightened global competition are all taking their toll on the performance of manufacturers across the UK.

“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 processes and technology. It will be difficult for many manufacturers to regain lost ground in these areas particularly as digital transformation picks up pace.”