Now the United Kingdom has finally left the European Union, but what does the British economy have in the future? After a recent LSE forum, Gerard Lyons, Vicky Pryce, and John Van Reenen raised questions on the economic impact of Brexit from LSE staff, students and members of the general public.
Much attention was paid to the economic impact of Brexit including inflation in the UK (can also be checked on calculators.tech), but most votes for Brexit come from outside of the country. What is Brexit going to provide for the people living in these areas? We talked to Gerard Lyons is an Economist (British)- He is also a co-writer of Clean Brexit: How to Make a Success of Leaving the European Union. Vicky Pryce who is an Economist (Greek) and former Joint Head of the United Kingdom’s Government Economic Service and John Van Reenen- Professor of Management and Economics at the Massachusetts Institute of Technology (MIT).
This was after the vote that people in London decided to show how they were different from the rest of the United Kingdom and how much they voted in the referendum. London was recommended to have its own immigration policy. Some people have actually created articles on what can be achieved for London alone. In many major cities, of course, the vote was like London and substantially different from other places in the country. And I must confess, I live in London and maybe we haven’t really seen what happens outside the capital.
What the government is now planning is to really change this and ensure that these northern areas are profitable. We have already seen their commitment to helping the Flybe airline in national matters. Remember many people are concerned about state aid to say that you can’t do what they do as EU members for Flybe–it’s, in any case, addressed to the EU. But you can also do different things for the areas that are allowed. State aid has always been used as a reason to avoid money being given to certain sites.
But what has changed in the last ten years has been that the money going to the regions has been significantly reduced. The Regional Development Agencies (RDAs) have been dropped. They were substituted by what are referred to as local business alliances (LEPs), which effectively put together different actors from specific regions.
They didn’t necessarily know what they were doing, and for quite some time they received very little income. This takes a long time for this to be resolved and many of the regions that have voted Leave are impacted by the loss in productivity. We will be very unfair, where everyone else is relegated, and the world is so much more complicated.
I believe that due to the needs of those countries, any infrastructure spending should take place. But the effect on those areas is going to be so lengthy that it is virtually wasted of time and money. It might be viewed as something optimistic, but without a major
repartition–one that really impacts London really badly we won’t just see an effect on northern areas, so I believe there will be a great disappointment for people living in them.
John Van Reenen:
One little aspect I just want to write. They claim the people in the North have supported Brexit. Okay, there was a Brexit alliance. Many of the electors were traditional Conservatives residing in the affluent countryside, and they are not only those who reside in the northern regions.
What’s going to happen? They’ll be worse off. For example, residents in Sunderland, where the Nissan car plant is based, are potentially worse off as more development shifts out of these places. It will be the reverse of what those voters in conventional Labor regions that voted in favor of Brexit endorse. Such men, due to Brexit, would, unfortunately, be worse off.
Gerard Lyons:
The National Statistics Service encompasses the United Kingdom in 12 areas. Of the 12 countries, 3 voted Remain: Northern Ireland, Scotland, and England. Leave was voted by nine other states: Scotland and the 8 areas in England beyond Town. The 8 areas were the most Euro-enthusiastic and the most Eurosceptic from 1975 and the first referendum to the 2016 referendum.
This subject is now attracting scholarly focus, but when you look at it a number of issues are illustrated. One is government expenditure.
If you had the UK on average 100, Northern Ireland is 121, so you get 21% more public spending per citizen than the UK average. Scotland is around 119, Wales and London are about 118, East England is about 91, and East Midlands is about 91.
South East England is about 90, South West England 90. South-west England has about 90. One thing, therefore, is more spending.
Control is another thing. Essentially, small and medium-sized companies do not care about specific regulations and are concerned about the whole scale of regulators and about their enormous nature. So, what one wants to suggest is that the North-East of England, listed, now comes to the fore with issues such as free ports.
One of the major problems in academic work is who serves the public. When in London you ask people does Parliament serves them, they say yes. If you question people in the rest of Britain, they claim no on average.
So, under Lord Salisbury, you have a formal cross-party group set up. At the end of the day, the whole issue is about devolution. Tony Travers has performed some excellent work on
the London devolution process for the previous Mayor of London–and possibly for the current one. And there are many concerns about this being moved across the world.
There is no reason to believe that these areas are going to be worse. When you look at what the present Japanese ambassador to Great Britain said a few months ago, apart from Honda, he emphasized how other Japanese auto-firms wanted to invest more in the UK for R&D purposes. It’s quite fun, so let’s see at the end of the day what happens.
Much of the confusion created by the referendum is that people who voted for the Leave didn’t know what Brexit they voted for. What kind of Brexit the UK government will be pursuing is still uncertain, but it seems more and more like a weak alignment plan. Which influence will this have after the end of 2020, in particular on the market effects of food, salaries and other issues impacting ordinary people?
Gerard Lyons:
In many ways, it was quite obvious what people voted for. It was so much reported that leaving the Single Market and quitting the customs union was unthinkable. There are many common reasons why people vote. Some polling also showed that people opted first for freedom, secondly for resettlement and thirdly for the environment, which was demonstrated by NHS and other factors.
Green Brexit’ is a book I co-authored with Liam Halligan that speaks not only to remaining but to Leavers. Therefore, the United Kingdom needs to invest more. One of the issues recently listed growing concerns the problem of EU migrants is the lack of investment in schools and training in the UK.
I now assume that the State expects that companies can spend more on their UK staff’s skills and training as a result of a point-based relocation scheme, but we will see how that works.
I assume that the UK economy should be optimistic. The United Kingdom is moving away from the EU, but we want a reasonable future relationship with that. Nevertheless, the EU still poses several major challenges, like the UK.
It’s not just the west or everyone else when you look at the last decade. The United States has grown rapidly in the western part of Europe. Western Europe will reposition itself in this evolving, growing global environment, including the United Kingdom. And if we get the benefits right perhaps spend in then some of the issues raised by people can continue to be answered.
This article is an edited transcript of a Q&A which took place on 27 January at an event held at LSE. Members of the audience posed several concerns.
