27 July 2017

Centre for Economic Performance: Brexit, trade and the economic impacts on UK cities

The paper summarises new analysis by the LSE’s Centre for Economic Performance (CEP) and Centre for Cities, which examines for the first time the potential impact of both a ‘hard’ and ‘soft’ Brexit on British cities in the ten years following the implementation of new trade arrangements with the EU.

All British cities are set to be negatively affected as a result of higher trade costs between the UK and EU, and this impact will be greater in the scenario of a ‘hard Brexit’. Economic output in cities (as measured by Gross Value Added, GVA) is predicted to be 1.2 per cent lower on average under a ‘soft Brexit’ and 2.3 per cent lower under a ‘hard Brexit’ than if the UK remained in the EU.

• Cities with large shares of employment in private-sector knowledge-intensive services (KIBS), predominantly in the South, are predicted to be most negatively affected due to the increase trade costs linked to Brexit.1

• Cities that are predicted to be most negatively affected by Brexit were more likely to vote remain in the 2016 referendum.

• Cities predicted to be most negatively affected tend to be more productive and have highly skilled workforces, which means they may find it easier to adapt in the longer term.

• National government needs to consider the spatial implications of deals negotiated and support cities to adapt to changes in the UK’s international trading relationships. Cities should combine this insight with local knowledge to consider how approaches to local economic development should be restructured. 

Full analysis

© CEP -Centre for Economic Performance