Which manufacturing sectors are most vulnerable to Brexit?
12 February 2018
Trade experts warn, in a new report, that the UK’s high-tech and medium-high-tech industries are most at risk of slower production after Brexit.
The report is the most detailed independent analysis yet of the potential Brexit impact on UK manufacturing. It models five Brexit scenarios, from a ‘soft’ to a ‘hard’ exit, across 122 manufacturing sectors.
It claims that high-tech industries could see production decline by anything between 3.5-10.6 percent and medium-high-tech industries at 13.1 percent, depending on the type of deal agreed. A no-trade-deal Brexit would see manufacturing output drop by an average of 5.5 percent and industry prices increase by 5 percent.
None of the five scenarios see UK manufacturing in a positive light.
The researchers, from the UK Trade Policy Observatory (UKTPO) at the University of Sussex, say that even signing a Free Trade Agreement with every other country in world would not make up for leaving the EU without a trade deal.
Dr Ilona Serwicka, UKTPO Research Fellow in the Economics of Brexit at the University of Sussex, said: “Even membership of the European Economic Area would result in higher trade costs and reduced market access in comparison to that currently enjoyed by the UK as a full member of the EU.
“These higher costs will harm UK manufacturing.”
Manufacturing exports are also facing a decline of between 5-20 percent. Most vulnerable are the international sales of processed and preserved meat, which face a fall of 72 percent in exports if no deal is reached. Nine sectors face a decline in exports of 50 percent or more – all belong to the food processing industry.
If the UK Government can secure a deal to stay in the Single Market, the outlook improves. Under this least-disruptive scenario, the analysis suggests that manufacturing exports would fall by a more modest five per cent, while production faces a 2 percent decline and prices would rise by 1.2 percent.
Dr Michael Gasiorek, UKTPO Fellow and Senior Lecturer in Economics at the University of Sussex, said: “This in-depth analysis confirms that Brexit is likely to have very different effects on different industries and sectors, and it is really important to understand these differences – for future policy and for the negotiations with the EU.
“The type of Brexit we end up with really does matter.”
Professor Alasdair Smith commented: “While manufacturing is likely to take a hit whatever option is chosen, a soft Brexit deal for the UK could avoid catastrophe in favour of something far more manageable.”