Brexit will hurt the car and financial services industries and locations as diverse as London and the Isles of Scilly, in particular, according to the Office for National Statistics.
The ONS has drawn up an analysis showing which parts of the country could be most affected “because they are home to a concentration of industry or industries which have most at stake when the terms surrounding access to the single market, the free movement of labour, levels of funding and existing EU regulations are discussed”.
London, West Somerset, Weymouth and Portland in Dorset, the Isles of Scilly and South Ribble, near Preston in Lancashire, have been identified by the ONS as locations that have an especially heavy reliance on European Union workers.
The ONS said: “The EU is the UK’s biggest single trading partner. It accounted for 48 per cent of goods exports from the UK and 39 per cent of services in 2016. And some industries will have a particular focus on [Brexit] negotiations. ”
Which industries currently benefit from EU trade links?
All British businesses enjoy free trade with the EU at present, but a failure to reach a trade agreement could mean tariffs and quotas under World Trade Organisation rules.
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The car industry is particularly reliant on EU trade, both for export sales and imports of key components in the production process. The ONS said that the EU accounted for 42 per cent of UK car exports and 88 per cent of imports in 2016, and added: “If the UK and EU were to trade under WTO rules, cars would face a 10 per cent tariff. About one third of the jobs in the car industry are in the West Midlands.”
Trade with EU countries is also crucial for Britain’s banks, insurers and other financial institutions. The UK exported about £24 billion of financial services in 2015, nearly half which went to the EU. Areas of the country where financial services companies are dominant employers include London, Surrey, East and West Sussex, Gloucestershire, Wiltshire, Bath and Bristol, Cheshire, West Yorkshire and eastern Scotland.
Which industries rely most on migrant workers?
One of the hottest Brexit negotiation topics is the future of EU nationals living and working in the UK. European migrant workers are considered important to many sectors, particularly hotels, restaurants, construction and public services. The ONS said that local economies could face staff shortages if EU nationals were to leave en masse.
Any changes to EU workers’ rights could have an impact on construction projects across Britain. South Ribble has the highest concentration of construction jobs, more than four times the national average. According to the ONS, overall there were more than 150,000 EU nationals working in construction across the UK in 2015.
Public services could be affected as more than 300,000 EU nationals were working in education, health and social care in 2015.
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Which sectors are affected by EU funding and regulations?
Scientific research is essential for driving innovation and productivity across the UK and benefits from EU funding and access to European researchers. The ONS said that the east of England and the southeast accounted for more than half of employment in the scientific research and development sector in 2015.
However, agriculture and fishing arguably are most affected by EU regulation as they are governed by the common agricultural policy and common fisheries policy. Wales and Scotland have the highest concentration of jobs in agriculture, forestry and fishing and are regions most likely to be affected.
• Inflation across the 19 nations of the eurozone fell to 1.3 per cent in June, easing pressure on the European Central Bank to start withdrawing its mammoth stimulus package (Patrick Hosking writes).
The drop in the consumer prices index from 1.4 per cent in May was in line with expectations. However, core inflation, which excludes raw food and energy, rose from 1 per cent to 1.2 per cent. The slowdown in the headline rate was partly due to a fall in energy prices, Eurostat, the official statistics office, said.
Comments by Mario Draghi, the ECB president, who aims to keep inflation close to but below 2 per cent, raised expectations three weeks ago that the central bank might start to ease back on quantitative easing, but the latest data suggests he will not be in any great hurry.
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Weak government and interest rate fears send confidence plunging
Private investor confidence in Britain fell sharply this month after the Conservatives’ election setback and expectations of an interest rate rise (Patrick Hosking writes).
The Hargreaves Lansdown investor confidence index dropped from 86 in June to 69. Its long-term average since its creation in 1995 has been 99.
The index, which is based on predictions by Hargreaves Lansdown clients about where the share market is heading, was still up on a low point of 59 recorded for November last year after Donald Trump’s victory in the US presidential election.
Laith Khalaf, a senior analyst at Hargreaves Lansdown, said that the election of a limp government and worries about Brexit negotiations were affecting sentiment. Clients were concerned, too, that share markets were being propped up artificially by quantitative easing and, in Britain, by the weakness of the pound.
“Investor confidence is scraping along pretty close to the bottom of the barrel right now, in stark contrast to the stock market, which is riding high,” he said. However, in spite of being bearish, private clients were not selling shares in significant numbers, he said.
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In other findings, investors are braced for interest rate rises, with 81 per cent expecting a rise in the base rate in the next 12 months, up from 54 per cent asked the same question last month.
The pound fell back to below $1.31 yesterday amid fresh nerves about the robustness of the government and the new round of Brexit talks.
Last week it rose to its highest level against the dollar in ten months. Recently sterling has risen on the back of less doveish interest rate expectations. It could rise again today if official inflation numbers come in ahead of expectations. Analysts expect the annual rise in the consumer prices index to fall from 2.9 per cent to 2.8 per cent.