Workers in certain manufacturing sectors are particularly exposed and could struggle to find jobs elsewhereby Agnes Norris Keiller / October 11, 2018 / Leave a comment
With less than six months until the UK leaves the EU, what Brexit will mean for UK trade policy remains shrouded in uncertainty. While the government has stated it wishes trade between the UK and the EU to remain “as frictionless as possible,” it also aims to eventually leave both the customs union and the single market. Leaving these institutions will almost inevitably make it harder for firms in the UK to both import from, and export to, the EU. What has so far been less clear is exactly where in the economy such impediments to trade are likely to have the greatest impacts.
In recent research we have examined in detail how different industries could be affected by potential trade barriers between the UK and the EU and which types of workers are most at risk of negative impacts. This blog post summarises some of the main findings.
Increased barriers to trade with the EU are expected to have a negative impact on the economy as a whole, but these impacts will also vary greatly across different industries. Across a range of trade policy scenarios, manufacturers of transport equipment (including car manufacturing), of chemicals and pharmaceuticals and of clothing are likely to experience the largest negative impacts on their value added (the value of output minus the cost of production inputs). If the UK were to leave the EU without a trade deal, increases in trade barriers would expose these industries to estimated reductions in their value added of between 15 and 20 per cent. These effects are more than seven times greater than the estimated negative impact of trade barriers on the economy as a whole. Negative impacts would be less severe if the UK stayed within the European Economic Area, but these industries would still be exposed to falls in value added of between 4 and 7 per cent.
There are three main reasons why clothing, transport equipment and chemical and pharmaceutical manufacturers are particularly exposed. First, around 25 to 30 per cent of the inputs used are imported from the EU. A UK car manufacturer may for example import engines from Germany and bumpers from Eastern Europe. Second, around 25 to 40 per cent of their output is sold to the EU. As a result, reductions in demand from European consumers as imports…