Think tank warns North East will be among areas hardest hit by bungled Brexit

A think tank has warned the North East will be among the worst affected areas if Brexit goes wrong
A think tank has warned the North East will be among the worst affected areas if Brexit goes wrong

The North East will be one of the areas hit hardest by price rises in the event of a bungled Brexit, says a new report.

Progressive policy think tank IPPR says UK regions outside London will experience greater impact from price rises than the capital, and identifies the areas it says are particularly vulnerable because of their reliance on EU trade.

Our findings suggest that post-Brexit price rises will squeeze incomes more in parts of the UK outside London.

Marley Morris

“Wales and the North East are the regions with the highest EU goods exports relative to the size of their economies, putting them at greater risk of an adverse economic impact from trade barriers in goods,” it says.

The IPPR says regions outside London are likely to see the cost of living rise more sharply because of rises in transport costs, which will have a disproportionate impact outside the capital.

Researchers found larger impacts for people outside London, in part because housing costs – expected to be less affected by Brexit – make up a smaller part of their spending, while transport costs, likely to rise more through increased prices of vehicles, make up a larger part.

They estimated a ‘hard’ Brexit, where the UK is forced to fall back on World Trading Organisation rules, would see an average ‘basket’ of goods and services rise in price by 2.7 per cent in London, but between three and 3.2 per cent elsewhere.

The IPPR report recommends the best way of minimising the predicted negative impacts of Brexit on poorer groups and regions is for the UK to pursue the option of a ‘shared market’ in its negotiations with the EU.

This would include a comprehensive customs union and an agreement on regulatory alignment with the single market, together with a mechanism to allow for the possibility of divergence over time.

IPPR senior research fellow and author of the report, Marley Morris, said: “Our findings suggest that post-Brexit price rises will squeeze incomes more in parts of the UK outside London.

“Limiting these impacts will require a new relationship with the EU that preserves our trade links.

“Negotiating a ‘shared market’ – based on a customs union and a deal on alignment with the EU’s single market – is the most promising strategy for minimising post-Brexit price increases for households.”