Brexit and the Regions

There has been much heat produced by political debate since the UK voted to leave the EU. But little light has been shed on the potential impact Brexit might have on vulnerable households in the UK. To address this gap, today the Financial Inclusion Centre publishes its new report assessing how vulnerable households in the nations and regions of the UK are in the run up to Brexit.

The consensus is that the economy of the UK will take a hit from Brexit – the harder the Brexit, the bigger the hit. But, this report, funded by Barrow Cadbury Trust, warns that weak economic performance in the North East, Wales, Northern Ireland, Yorkshire and Humberside, the North West, and the West Midlands – compounded by high levels of household financial vulnerability – leaves households in these regions particularly vulnerable to the potential effects of Brexit.

The report highlights that these regional economies have been performing very poorly on key measures of economic activity creating a gap with the powerhouse economies of London and the South East which has widened still further since the financial crisis.

The Government’s own economic analysis has concluded that these regions would be hit hard by Brexit – particularly a hard Brexit. The regions expected to be hit hard by Brexit also have high proportions of households who are overindebted, are in financial difficulty or just surviving, or who are considered to be financially vulnerable.

Unless mitigation strategies are adopted by national and local government with civil society and industry stepping up to the plate, Brexit will make the situation even worse. This will have serious consequences for the millions of households across the regions who are already financially vulnerable.

The report, for the first time, brings together data on economic performance, household financial vulnerability, and assessments of Brexit impacts to paint a compelling, worrying picture of regional vulnerability in the run up to Brexit.

Key findings include:

  • Over the 10 years since the financial crisis, weekly earnings averaged £510 in the North East, £486 in Wales, and £467 in Northern Ireland compared to £753 in London – and that gap has widened post the financial crisis.
  • In the 10 years before the financial crisis, economic output per head[1] in the North East was on average £4,800 lower than the UK average – that gap grew by £1,400 to an average of £6,200 after the crisis. The gap for Wales widened by £2,000, while Northern Ireland saw the gap grow by £1,600.
  • In the 10 years before the financial crisis, the North East received fiscal support[2] equivalent to an average of £2,600 per head per year. Since the crisis, that rose to an average of £4,300 per head per year. For Wales, that level of support rose from £2,900 to £5,000 per head per year. For Northern Ireland, from £3,600 to £5,500 per head per year.

Author of the report Mick McAteer said: “The potential impact of Brexit on the UK economy is obviously front of mind. But, this is the first real attempt to understand how Brexit could affect vulnerable households across the regions at a time when real average earnings in the UK are still 3% lower than 10 years ago.

“If the Government’s own economic predictions are correct, Brexit will cause these gaps between the various countries and regions of the UK to widen still further.

“It is only in London and the South East where we see the amount of public revenue generated being greater than public expenditure. This has potentially serious implications for the weaker UK regions. If the powerhouse economies are hit hard by Brexit, this will undermine their ability to finance these levels of fiscal support which have played a significant role in minimising inequality in the UK.

“In the worst-case scenario, some of the most vulnerable regions could suffer a ‘triple whammy’. First, a very significant loss of potential economic output. Second, these regions also face the loss of EU funding and third, unless fiscal transfers from stronger parts of the UK economy can be maintained at the same level to mitigate these impacts, the combined economic shock could be severe.”

Malcolm Hurlston, Chairman of the Financial Inclusion Centre added; “Mitigation strategies are needed immediately to protect vulnerable regional economies from the impact of Brexit. Indeed, the results of our in-depth report suggests that renewed efforts should be made to tackle the problems even if Brexit didn’t actually happen.”



[1] As measured by Gross Value Added (GVA) per head

[2] This measures the difference between the public revenue spent and public revenue generated in a region