Hard Brexit would shrink Welsh economy by up to 10 per cent, analysis finds

First Minister Carwyn Jones warns Theresa May that leaving EU without trade deal will be 'catastrophic' for parts of Welsh economy

Carwyn Jones will warn that leaving the EU without a trade deal would have be 'hugely damaging' for the Welsh economy (PA)

The economy of Wales could shrink by up to 10 per cent if Britain leaves the EU without a trade deal, according to new analysis released by the Welsh Government.

The study, by the Cardiff Business School, found Wales will be hit disproportionally hard in comparison to other regions if Theresa May’s government takes the UK out of the EU single market and customs union.

Major employers in industries such as car manufacturing, steel and aerospace will be especially hit by a hard Brexit, researchers warned.

After consulting with dozens of companies, including several key employers, they found “few firms identifying any positive opportunities deriving from the Brexit process”.

The report found that, if the UK tumbles out of the EU and reverts to World Trade Organisation (WTO) terms in the absence of a trade deal, the Welsh economy would likely shrink by between 8 and 10 per cent, equating to between £1,500 and £2,000 person in Wales.

The analysis was published as Carwyn Jones, the Welsh First Minister, launched a new paper outlining his Government’s vision for trade after Brexit.

The plan says there must be no new tariffs imposed on the 61 per cent of Welsh exports that go to the EU and, in a move that places the Welsh Government firmly on a collision course with Whitehall, states that Wales should retain membership of the customs union and “full and unfettered” access to the EU single market after Brexit.

While the Welsh Government cannot veto Brexit, it can cause problems for Ms May by refusing to give its consent to the legislation needed to take Britain out of the EU. This would force ministers to overrule the devolved administration, breaching a long-standing convention on devolution.

Mr Jones said the new analysis showed Ms May is wrong to suggest “no deal is better than a bad deal” and said the Government’s policy of leaving the single market and customs union would be “hugely damaging” for Wales.

The First Minister has previously clashed with the Government over its plans to give ministers the power to amend laws in areas usually controlled by the devolved administrations.

The Welsh Government called on Ms May and her ministers to explain how they will replace trade lost with the EU and emphasised the need for a transition period to give businesses time to plan for Brexit. It also demanded that decisions about the future of the UK’s relationship with Europe must be taken in conjunction with the devolved administration.

Launching his trade plan in Cwmbran, south Wales, on Friday, Mr Jones is expected to say: “Welsh exports are worth £14.6bn each year, with 61 per cent of Welsh exports and just under half of our imports going to and from the EU. Wales is currently attracting record levels of inward investment, which is largely due to our access to the EU’s 500 million customers.

“As our trade paper highlights, moving to WTO rules and the imposition of tariffs could have a catastrophic impact on our lamb sector and on the Welsh shellfish industry, which currently exports around 90 per cent of their produce to the EU.

“These hard facts underline what is at stake if the UK Government fails to get the right deal for the UK or we crash out of the EU without one.

He will criticise the Government’s approach to Brexit and the Prime Minister’s decision to leave on the table the option of leaving the EU without a trade deal.

“I fundamentally disagree with the Prime Minister’s well-worn phrase that ‘no deal is better than a bad deal’ and believe leaving the single market and the customs unions would be hugely damaging for Welsh businesses and jobs, with our agricultural, food producers and automotive sectors being particularly hard hit,” Mr Jones will say.

“Ministers in London have yet to show us any evidence of the benefits of leaving the single market and the customs union or how new trade deals would replace the benefits of access to the EU. In fact, UK Government documents that have come to light this week chime with our own analysis of a post-Brexit economy.

Mr Jones will describe his vision for Wales after Brexit as an “outward looking, globally trading nation, open to the wider world while maintaining our strong trade with the EU”.

The First Minister is due to be quizzed by MPs from a key parliamentary committee on Monday. The Public Administration and Constitutional Affairs Committee is carrying out an inquiry into Brexit and devolution and will hear from Welsh leaders angry at what they say is the Government’s failure to fully include them in the Brexit process.