Areas outside London to be hit hardest by Brexit price rises, says report
PUBLISHED: 00:01 04 July 2018
Households outside London are likely to be hit hardest by an increase in the cost of living caused by Brexit, according to a new study.
A Hard Brexit - in which the UK leaves the European single market and customs union - would push average household expenditure up by around 2.7% in London and 3%-3.2% elsewhere in the UK, found a report by the IPPR think tank.
With a "soft" Brexit, which allows the UK to maintain close trading ties with the EU, the impact would be about 1.5% in the capital and 1.7% in the rest of the country, it said.
The report warned there was likely to be only a "fairly small" reduction in prices from any new trade deals struck by the UK after leaving the EU, which would only "partially compensate for Brexit-induced price increases".
It found that the cost of living impact of Brexit will be felt less by Londoners because they spend a greater proportion of their income on housing, which is not expected to be greatly affected, and less on transport, which takes up a bigger slice of household spending in the rest of the country.
The report also identified Wales and the North East as the regions most vulnerable to a drop in income due to increased barriers to trade with EU states after Brexit.
Areas with the highest EU goods exports relative to the size of their economies are Flintshire & Wrexham, Sunderland, Telford & Wrekin, South and West Derbyshire and Luton, largely due to the presence of car plants and their supply chains.
High-paying industries, such as finance and chemicals, are expected to suffer more negative economic impacts from Brexit, but a number of lower-paid sectors are also expected to be hit, the report found.
Report author and IPPR senior research fellow Marley Morris said: "Our findings suggest that post-Brexit price rises will squeeze incomes more in parts of the UK outside London.
"Limiting these impacts will require a new relationship with the EU that preserves our trade links. Negotiating a 'shared market' - based on a customs union and a deal on alignment with the EU's single market - is the most promising strategy for minimising post-Brexit price increases for households."
Hywel Williams, Plaid Cymru's Westminster Brexit spokesman said the approach of the Conservatives and Labour was "beginning to reveal itself across the UK and as this report shows – more so in Wales than the other UK countries".
He said: “Families are already £900 a year poorer than they would have been had the referendum result gone the other way, and if we follow the policies of both Theresa May and Jeremy Corbyn and leave the Single Market and Customs Union, we will fall further significantly further behind as the cost of living soars.
“Just over a week ago one of Wales’ most important employers warned they would have to consider leaving Wales as a result of Tory and Labour Brexit policies, and since then the Tory Westminster Government has broken its promise to invest in the Swansea Bay Tidal Lagoon.
"They are refusing to create jobs and boost wages in Wales while at the same time threatening the jobs that already exist."