In this blog, Frank van Oort, Erasmus University Rotterdam, summarises the outcomes from the four workshops City-REDI recently ran across the UK.
Running among hundreds of people for the Virgin train from London’s Kings Cross to Leeds on a Sunday morning with exactly 5 minutes boarding time provided, makes you realise how uncomfortably tight the UK can plan things. Well, I was warned by exactly the same stressing scenes in Edinburgh one week earlier, jumping just-before-whistle on a West-coast Virgin train to Birmingham. In all four places, a City-REDI led team of researchers engaged in stimulating discussions with stakeholders on the regional and sectoral implications of Brexit in the UK, and how to handle these from a local policy point of view. Similar to the average train traveller, the important question was how to make sure that UK regions and cities board on time and do not miss out because of last-minute announcements of destination platforms, pricing and capacity terms, changing conditions for qualified labour running and servicing the business, and connecting linkages to internationally networked customers.
Four regional meetings with over 250 stakeholders, both policy and practitioners experts, showed that these concerns are legitimate. Professor Philip McCann (Sheffield University), part of the research team, started off all meetings by warning that last-minute stress on Brexit and its regional implications is not a fictional scenario. The economic exposure of UK regions to trade barriers because of a hard Brexit are over 4.5 times more severe than in mainland Europe due to the integration of UK production and services into global value chains. Ironically, manufacturing based regions and cities voting Leave are relatively much more exposed than the business and financial service economies in London. Yet, because of its sheer size (despite non-specialization there is still a lot of production in Greater London), due to linkages of services to manufacturing elsewhere, and because of a possible lack of future talent or FDI flowing into the City, the London economy is not expected to be unharmed from Brexit: 12% of GDP and jobs at risk in UK regions compared to just over 2% in Europe; those figures resonated deeply in Birmingham, Leeds, London and Edinburgh.
Research team members’ Mark Thissen (PBL The Hague) and myself added the impacts on competitiveness to the discussion, by showing that UK cities and regions will witness rising production costs for the products and services they produce by typically 2% (and much more for certain sectors, and again in magnitude these are more than three times larger than EU counterparts) in case of a hard Brexit, and that UK regions are already losing market shares in important production and export markets. Such cost increases are sufficient to wipe out the profit margins of many sectors. In Birmingham, experts in the automotive industries indicated that investments in plants and production lines were substantially downsized last year. Not so in mainland Europe. Similar signals came from industries in The North. Fewer investments, rising prices: competitiveness-wise the UK regions and industries face major challenges indeed.
Yet, besides raising awareness, the meetings also resulted in lively debates amongst experts and think-tanks regarding local strategies and how to deal with this possible future. The world does not stop innovating, changing, individualising and capitalising because of Brexit. Yet, it is the uncertainty of what Brexit may entail, and under what conditions business has to work in the future, that seems to weaken creativity, expectations and trust. Policy-oriented stakeholders are aware of that, and in all four cities, it was stated that local policy should remain focused on the existing agendas of innovation, skill-upgrading, employment, and creating a favourable regional context for accommodating societal challenges such as energy transition, ICT-based development in industries and households, sharing economies and technological advancement. The intelligence in competitiveness gathered by the project helps to identify what region-specific and sector-specific factors contribute to local competitiveness vis-à-vis the European counterparts, and although policymakers and industry representatives are aware of these, they are only just started to make productive use of it. A more urgent implication of the Brexit-reinforced attention for local competitiveness surfaced in terms of “resources”. Devolution of policy instruments does not go hand in hand with accompanying budgets, and this raises specific concerns. Investments in infrastructure favour (the road to) London more than linkages across regions outside London. The trickle-down effect in employment (where highly skilled workers create work for low skilled workers in maintenance, catering, transportation and security) are much more prominent in London than in any other region, leading to less of such job opportunities for lower educated outside the capital. Economic transformations from agriculture and traditional manufacturing into new productive industries are urgently needed everywhere, and even more so in the devolved regions in Scotland, Wales and Northern-Ireland. The question is how to channel the creative initiatives on this. European funds (ERD, research cooperation like Horizon 2020, and agriculture) are important for accomplishing structural economic change in regions, yet their UK-replacements after Brexit are not yet known.
It has been widely suggested in the meetings that now is the opportunity to re-think these matters more seriously. There is much debate and societies want to change – the four meetings were a prime witness of that. The inequality in economic development between Greater London and other regions in the UK arguably is one of the main reasons for the 52/48 vote on leaving the EU. The “regions and places that do not seem to matter and feel left behind” and the “geography of discontent” have gradually turned into major policy challenges. While all UK-regions are outward looking and cherish talent and growth opportunities, the meeting in London strongly suggested that without place-based policies and investments, the divergence will only grow larger. The four regional debates showed ambition and preparation to work on a progressive Brexit for all, giving a strong signal to the UK in a Changing Europe initiative. Careful preparation, using available research outcomes, and communicating and acting on these are crucial for not leaving some behind on the platform while the train leaves on time. It is now 5 minutes before departure time…
This blog was written by Frank van Oort, Erasmus University Rotterdam, The Netherlands. 
You can view the presentations from all the event here.
You can find out more about the project here.
Disclaimer:
The views expressed in this analysis post are those of the authors and not necessarily those of City-REDI or the University of Birmingham.
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