Industry warns of triple whammy hit to red wall regions from ‘no deal’ Brexit and Covid

By - World Infrastructure Journal

New analysis of regional manufacturing performance  published by Make UK has warned that some of the UK's most economically deprived regions are at risk of a ‘triple whammy’ to their economies in the event of a 'no deal' Brexit.

The Make UK  report examines manufacturers' contributions to economic regions of the UK in terms of output, jobs and investment.

Make UK has found that regions with a high dependence on exports to the EU, as well as a higher than average dependence on manufacturing,  are  likely to be most at risk from 'no deal' with barriers to trade and tariffs. This will compound the damage already being caused by Covid-19.

In response, Make UK is re-iterating its call for the Government to work with industry and other stakeholders at a national and regional level to bring forward a National Recovery plan at a scale which targets key strategic sectors and the regions which are going to be hit disproportionately hard.

Compounding effects

Manufacturing is vital for many sectors of the economy within different regions across the nation. Tom Lawton, Head of Manufacturing at BDO expanded on this sentiment commenting: “Manufacturers now urgently require the Government to conclude a deal with the EU that protects their position and allows them to plan for the future.

"This needs to be underpinned by a long term support strategy to help them through the transition and beyond. Failure to do so could prove very costly indeed – particularly in those areas most reliant on EU supply chains and the Continental export market. ” 

The report also states that Covid-19 will have an additional detrimental effect on sectors hit by Brexit. Going on to describe a clear correlation between regional performance and exposure to industry sub-sectors which have been hardest hit by Covid-19, such as manufacturing, hospitality and aviation.

Where will be hit the worst?

According to the report, Wales (almost two thirds), the North East and Yorkshire & Humber (both just under 60 per cent) have a very high exposure to trade with the EU. Combined with high manufacturing dependency in Wales and the North East is significantly above  the national average (17 per cent and 14 per cent respectively). Make UK has stated that the risks of 'no deal'  are likely to be felt disproportionately by these  areas.

Since the Referendum in 2016, businesses have been making decisions on whether or not to continue to operate in the UK or to move to another EU nation and continue to enjoy the benefits that come with that. Ongoing difficulties in the automotive sector are having an ominous  impact on manufacturing and those regions most closely linked to it, mainly due to the Brexit vote. This has notably impacted on the West Midlands where a third of regional manufacturing output is accounted for by other transport.

Where will the least damage be seen?

London and the South East have been the best-performing regions in the last year and, to date, have been the least impacted by Covid-19 due to its exposure to electronics and the  increasing global trend towards  investment in 4IR related technologies such as robotics and artificial intelligence. These regions also have a growing food and drinks sector which is the second-largest sub-sector in London and the South East.

Stephen Phipson, Chief Executive of Make UK, said: “Should the UK fail to reach a comprehensive trade agreement with the EU then those regions with a high concentration of manufacturing and dependence on Europe as a major market will suffer a triple hit given the impact of Covid-19. For some companies, the combination may prove fatal. ” 

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