North-east England would suffer the biggest decline in economic output of any UK region by the middle of the 2030s if the country leaves the EU without a deal, according to an analysis of government figures by Britain’s leading business lobby group.
The Confederation of British Industry said the region could be among the hardest hit by a no-deal Brexit in less than 70 days’ time given the high percentage of exports of goods to the EU compared with other parts of the country.
Should Britain either choose to exit without a deal or fail to agree a compromise with Brussels, the gross value added (GVA) – a measure of the economic value of goods and services – could be reduced by 10.5% in the north-east by 2034 compared with the UK’s current arrangements.
The CBI said this would be equivalent to a loss of output worth £7bn, which is about twice the amount spent on schools and education in the region each year.
The lobby group said that high levels of manufacturing activity, including thousands of workers in the car industry, meant north-east England was “particularly exposed to the risk of higher tariffs and trade costs” in the event of Britain leaving the EU without a deal.
Goods exports to the EU from the region, as a percentage of total exports, are as high as 59%, meaning border delays, additional customs checks and other costs would hit it hard.
Josh Hardie, the deputy director general of the CBI, said: “The projected impact on the UK economy would be devastating and, while business will do all it can to reduce some of the worst aspects, a no-deal scenario is unmanageable.”
While the north-east would see the biggest proportional impact, the CBI said that the biggest reduction in economic output by value would come in London. GVA would be about 6% lower by 2034, the lowest of any region, but the scale of the capital’s economy means the value lost would be about £40bn.
Some pro-Brexit economists argue that a no-deal exit would have little impact, and could even boost economic growth, although their findings are often disputed.
The analysis from the CBI, which had previously argued for MPs to support Theresa May’s Brexit plan because there was a lack of alternative options, provides a breakdown by region for the potential hit from a no-deal departure.
GVA could be 8.1% by 2034 in Scotland, worth about £14bn in lost economic output per year by 2034. Wales would also see the loss of £7bn and Northern Ireland the loss of £5bn.
The West Midlands, which also has higher levels of manufacturing activity than other parts of the country, would see a loss of £18bn, while north-west England would suffer a hit of £20bn.