Responding to Brexit

We had our second workshop on potential implications of Brexit last week. LSE’s Knowledge Exchange and Impact fund has given us a grant to work with ten places interested in understanding the impact and thinking about policy responses – Birmingham, West of England LEP, Cambridge, Enterprise M3 LEP, Hull, Leeds, North East LEP, Peterborough, Preston, and Sheffield. Together we are attempting to hone our thinking about how the macroeconomic changes caused by leaving the EU will impact specific local economies, and what they might do to prepare and respond.

We had asked the cities to think about how they might respond to two specific scenarios posed by Centre for Cities’ Naomi Clayton: firstly, a significant reduction in UK trade over the long term; and secondly, loss of EU labour. Analysis from the Centre for Cities’ Outlook, updated for the project, shows that local economies will face different challenges – some are particularly vulnerable to a drop in trade with the EU, others are more likely to be affected if immigration controls reduce their pool of low-skilled labour. Most areas can expect a changed landscape on both fronts.

A lot of the responses suggested by our ten places fell broadly into the policy categories of employment training, business support, and anticipating and addressing major redundancies. The balance of these approaches varied between places, but all agreed that, while these policies will need to be used to respond to Brexit, for the time being it is business as usual. They are not currently seeing major upheaval in their local economies, and none of them are currently planning a wholesale change in approach to economic growth policy.

There were some useful questions raised in the meeting – in fact, more questions than answers, at this stage. Here are three of the most interesting issues raised:

  • What are the early warning indicators that might help alert areas to signs of change in a local economy? Most places have good relationships and regular contact with the major employers in their area, through a variety of account management systems. All agreed, however, that these relationships can be labour intensive to keep active, (‘has anyone ever had a really effective system for sharing the information that comes out of these discussions?’ as one participant said). The current squeeze on local government resources makes it even more difficult (‘we had 54 people in economic development 5 years ago, now we have 10’). Even in the best of times businesses cannot be expected to give their local government ample notice of impending large-scale redundancies, for a variety of good reasons. Identifying potential ‘canaries’ of economic change is a topic that we will return to in our next session.
  • Can we, and should we, help local businesses access new export markets? Brexit likely means big changes in export shares across different markets. How to we help firms adjust to challenges in existing EU markets and make the most of new opportunities elsewhere? Given the fact that this is an area where imperfect information is a common problem, there may be some very cost effective interventions available to local government to help their businesses access new markets.
  • We will be producing a toolkit summarising what approaches the evidence says are best in this area before the end of the year.
  • Should we be encouraging local employment, supply chains and procurement? The room was definitely (vehemently!) split on the value of these programmes.
  • We will be pulling together all of the robust studies we can find for an evidence-based discussion at our next meeting.
  • Are there things that central government could do to help? We’ll be making a list.

We’ll be meeting again in July to discuss these, and put together some advice that we hope will help other policymakers – in both local and central government – better plan their policy response to Brexit.

Written by Meg Kaufman

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