Exit from EU 'would worsen inequality across Britain' as poorer areas depend on manufacturing

Study notes that the regions with the most to lose economically tend to have the highest levels of Euroscepticism

A British exit from the European Union would hurt the poorest regions of the country hardest because they are more dependent on manufacturing exports, a report has warned.

The Centre for European Reform claims that a so-called “Brexit” could result in UK manufactured goods being hit by EU tariffs unless a free trade deal is agreed.

“Regions with manufacturing sectors that make up a large proportion of their economies look to be most at risk, and since these tend to be poorer, an exit from the EU risks making Britain an even more unequal place,” said John Springford, the report’s author.

The study notes – with a hint of irony – that the regions with the most to lose economically, such as the West Midlands and the North-east, tend to have the highest levels of Euroscepticism, according to opinion polls.

It simulated the impact of the EU’s existing range of goods tariffs if they were imposed on the UK, and found that the North-east would see tariffs of £197m on its exports, mostly in the car manufacturing sector, equating to 0.43 per cent of the region’s output.

Next hardest hit would be Northern Ireland, followed by the East Midlands and West Midlands. The least affected area would be London, where the financial hit from tariffs would represent just 0.11 per cent of output.

24-Welding-MarkPinder.jpg
South Tyneside College has a fabricated factory workshop which mimics working in the manufacturing or engineering industry. The north-east would see tariffs of £197m on its exports, mostly in the car manufacturing sector, equating to 0.43 per cent of the region’s output.

Factoring in potential EU restrictions on UK services exports does not significantly change the picture. with the hardest-hit regions still being the North-east, followed by the North-west and the West Midlands.

Official statistics show that London’s regional gross value added per person in 2014 was £40,215, while in the North-east it was just £17,381. In the North-west it was £19,937, and in the West Midlands it was £19,428. The national average was £23,394.

Mr Springford acknowledged that some manufacturers might manage to absorb the costs of tariffs by making efficiency gains or increasing sales to other parts of the world. But he also pointed out that since much of UK trade is in intermediate goods by multinational firms, it could find it difficult to redirect trade away from Europe.

The Conservatives plan to hold a referendum on membership of the European Union in 2017 if it wins the general election next month.

In a poll of 6,000 people by comparethemarket.com, only 6 in 10 said they  would “definitely vote” in a referendum. It also found that 38 per cent believe they would be better off out of the EU, while 35 per cent believe that they would be worse off.

Chris White, head of UK Equities at Premier Asset Management, said: “I think that a Brexit would be unsettling for UK business. The UK is one of the most open and outward-looking economies, and many foreign companies have settled here because we are seen to be a business-friendly country and a gateway to the European market.

“The reaction of big overseas companies to a Brexit is not clear, but they may find that the playing field has been changed. This would also have implications for their supply chains. In financial services there could also be a large potential impact. Would London retain its status as the centre of European finance if it is outside the EU?”

The Independent has got together with May2015.com to produce a poll of polls that produces the most up-to-date data in as close to real time as possible.

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