7 Feb 2018
A new report published by economists at the University of Sussex suggests that of the five proposed Brexit scenarios laid out by the government, none would result in a positive outcome for manufacturing in the UK.
According to this research – from the UK Trade Policy Observatory – sectors that involve high to medium-high technology manufacturing, including electronics and machinery, will be the hardest hit once the UK leaves the EU. However, the impact regionally and on the UK’s 122 manufacturing sectors vary depending on the policy scenario.
The report suggests that the bigger the policy change, the more significant the impact on trade in the sectors affected in each scenario.
Motor vehicles, pharmaceuticals and medicinal chemicals, and air and spacecraft are among the manufacturing sectors that are most reliant on EU imports and exports, and would be disproportionately affected, the research suggests.
‘There are some sectors (especially in the food processing industry) that may see an expansion in output after Brexit, but the effects are small and come at the expense of higher consumer and intermediate goods prices,’ says the report.
Across the five scenarios, the biggest price increases were in transport, chemicals, and pharmaceuticals – 9.8% in products of the transport sector and 7.5% for chemicals and pharmaceuticals in the most pessimistic ‘no deal’ scenario.
The results highlighted by the report may also have implications for the Industrial Strategy, which the government hopes will support economic growth, drive productivity, and enhance innovation, particularly favouring high-intensity R&D sectors.
‘The results show that there is a considerable heterogeneity in how different manufacturing sectors will be affected by Brexit and this, in turn, suggests considerable regional differences,’ it says.
‘These differences, coupled with the fact that most trade policy is made and applied at a very detailed level, highlight the importance of detailed disaggregated analysis for understanding the effects of Brexit on different sectors and different UK regions.’
Read the full report here.
By Georgina Hines