City-REDI Fringe Event at the Conservative Party Conference in Birmingham: Overcoming the Challenges of Brexit at Local Level

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With the Conservative Party Conference once again taking place in Birmingham, City-REDI held a fringe event on ‘overcoming the challenges of Brexit at local level’ on the 2nd of October. The discussions were around what the impact of leaving the EU will be on public policy, city regions, housing and jobs. On the panel we had:

Andrew Carter from the Centre for Cities spoke about how the UK’s urban areas are heavily exposed to EU trade, with half of exports going to the bloc versus only around 15% to the USA. Furthermore, he talked about how highly centralised policymaking power is in Westminster, which is something Jeremy Lefroy seconded, commenting that the UK is ‘unbelievably centralised’ and that this needs to be overcome. Professor Menon called the Brexit vote a ‘wake-up call’ for the regional problems that have existed for a long time in the UK, but the work needed for Brexit is taking place in a very divided country and is consuming all of the government’s time and attention. He added that ‘however we do Brexit, our economy will be smaller than it would have been had we stayed in’.

Professor Ortega-Argilés discussed her work on the impact of Brexit upon the UK’s regions and sectors. She stated that the regional policy debate around Brexit has been under played and that more than 20% of economic activity in the UK is at risk. There is no national response to regional effects which is why the work being done by City-REDI to map out the implications of Brexit on the sectors and supply chains of the British economy is so important.

With regards to city-regions, Andrew Carter spoke of his optimism that places like Birmingham were beginning to have some autonomy because Brexit was a complaint about the state of the regional economy, as well as how decisions are made in this country. Professor Menon seconded this, saying there is a massive political opportunity for change and that further devolution of power from Westminster to the regions is urgently needed. This is because the productivity gap between the most and least productive regions of the UK is the same as from the most and least productive country in the Eurozone, with London sucking in all talent and investment in the UK. Jeremy Lefroy also said that there is rigid control exercised from the centre having negative effects on the UK’s regions. He talked about the positive effects of regional economic development, such as the relocation of HSBC’s HQ to Birmingham which recruited mainly local people. He added that particularly the issue of housing is one of the most important economic and intergenerational issues, where greater devolution of power is needed so that regions can address their own local challenges.

Professor Anne Green presented her work on the impacts of Brexit on employment focusing particularly on migrant workers. There were three main stories from the research she has been doing at City-REDI on this:

  1. Migrant labour has enabled employers to restructure their workforces, including in low-skill sectors.

Employers have been able to design jobs in ways that have been acceptable to migrant labourers, particularly those from Central and Eastern Europe who do not plan to stay in the UK for the long-term. These jobs are less acceptable to established UK residents who want more certainty about hours and earnings. After Brexit, this workforce structure may need to be re-thought, for example by looking to new labour pools, such as economically inactive or disabled people, as well as those who work part-time. This could be a route to greater inclusion. Another option would be for businesses to change their operating models, for example by investing more in training and technology, which might lead to fewer but better quality jobs. This could increase both wages and productivity but also cause employers to reduce the number of jobs they offer, as well as their geographical footprint.

  1. The migrant density of different sectors and local variations in the sectoral composition of employment constitute only part of the story in understanding local impacts of Brexit.

Sectors such as food manufacturing and hospitality are among the most reliant on migrant labour, with migrants comprising around a quarter of total workers in these sectors. This is the pattern across most local areas – so the expectation might be that those local areas that have high proportions of workers in those sectors will be among the most vulnerable to labour shortages in the case of a reduced inflow of migrant workers (and migrant workers choosing to leave the UK). However, there are sectors such as construction where reliance on migrant labour tends to be more regionally-specific. For example, around 2 in 5 construction workers in London are non-UK citizens – substantially more than any other region. As wages rise, other local areas in the UK could see out-migration to London. In recent times, the traditional internal migration flow from North to South in the UK has been to some extent replaced by international migration to London and the South East.

The message is that even local areas where there is a limited reliance on migrant workers in particular sectors can be vulnerable to out-flows of skilled (and unskilled) workers to areas of skills and labour shortages – such as London – where there are higher wages.

  1. Different places have different capacities and capabilities to cope.

Rural areas and towns have some of the highest employment levels, oldest populations and least capacity to plan ahead. As such they are among the areas which have seen some of the largest percentage increases in the migrant share of the population over the period from 2004. Areas such as Mansfield, Northwest Leicestershire, West Lancashire, Maidstone, Boston, Taunton, Corby, Barnsley and South Northamptonshire saw increases in the share of the population from a migration background of between 208% and 391% between 2004 and 2015. Remote peripheral areas have been some of the most reliant on EU migration to fill skill-shortage and hard-to-fill vacancies – especially in sectors like the NHS and agriculture. The Government has announced a sector scheme for agriculture – but as yet no sector-specific policies have been announced for other sectors, so leaving these areas vulnerable.

This blog was written by Liam O’Farrell, Policy and Data Analyst, City-REDI, University of Birmingham.

The opinions presented here belong to the panel rather than the University of Birmingham.

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