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A hard Brexit will cost Wales billions we don’t have

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Peter Gilbey

The UK Government’s courtship of a ‘no-deal’ is better than a ‘bad deal’ is reckless. A hard Brexit on WTO terms will cost Wales £1.1 billion a year.

Wales’ transition from a heavy industry economy to whatever it is we are now has been difficult. We had our share of the miners’ riots, and have also lost out from an overly centralised UK state with a lot of talent emigrating. There have been countless attempts at improving and maturing Wales’ economy, not least the years and years and billions of pounds of dedicated funds from the European Union (through the ERDF and ESF); this adds to the disbelief that a majority of voters in Wales voted to leave the EU.

What isn’t often discussed in Wales is the general economic benefit of being in the European Single Market. The benefit which allows net contributors to the EU budget to still benefit from being EU and/or Single Market members. Places like German, the Netherlands and Sweden all physically pay more into the EU budget than is returned through schemes like the ERDF.

Last week, the London School of Economics’ Centre for Economic Performance released a report detailing the impact a both a soft (zero tariffs but non-tariff barriers are applied) and hard Brexit (WTO rules) would have on the economies of every local authority in the UK. The results in Wales are as follows:


 2015 GVA  Soft Loss  Hard Loss
 City  £ million  Soft Brexit  Hard Brexit  £ million  £ million
Blaenau Gwent 764 -1.20% -1.90% -£9.17 -£14.52
Bridgend 2,779 -1.20% -2.10% -£33.35 -£58.36
Caerphilly 2,417 -1.20% -1.90% -£29.00 -£45.92
Cardiff 9,016 -1.30% -2.50% -£117.21 -£225.40
Carmarthenshire 2,806 -1.00% -1.70% -£28.06 -£47.70
Ceredigion 1,258 -0.90% -1.80% -£11.32 -£22.64
Conwy 1,809 -1.00% -1.90% -£18.09 -£34.37
Denbighshire 1,561 -1.30% -2.10% -£20.29 -£32.78
Flintshire 3,644 -1.00% -1.70% -£36.44 -£61.95
Gwynedd 2,317 -1.10% -2.00% -£25.49 -£46.34
Merthyr Tydfil 915 -0.80% -1.50% -£7.32 -£13.73
Monmouthshire 1,888 -1.00% -1.80% -£18.88 -£33.98
Neath Port Talbot 2,142 -1.00% -1.40% -£21.42 -£29.99
Newport 3,081 -1.20% -2.10% -£36.97 -£64.70
Pembrokeshire 1,964 -1.00% -1.80% -£19.64 -£35.35
Powys 2,251 -1.00% -1.60% -£22.51 -£36.02
Rhondda Cynon Taf 3,663 -1.20% -2.10% -£43.96 -£76.92
Swansea 4,503 -1.10% -2.00% -£49.53 -£90.06
Torfaen 1,492 -1.20% -2.00% -£17.90 -£29.84
Vale of Glamorgan 2,028 -1.30% -2.30% -£26.36 -£46.64
Wrexham 2,553 -1.10% -1.70% -£28.08 -£43.40
Ynys Môn 938 -0.60% -1.10% -£5.63 -£10.32

(Source: Dhingra, Machin & Overman, 2017, Welsh Government, 2016)

This is serious.

For the whole of Wales, this accounts for a loss to the economy of £627 million a year for a Soft Brexit and £1.1 billion for a Hard Brexit.

If the rhetoric since the EU referendum last year is to be believed, and a ‘no-deal’ is better than a bad deal (*rolls eyes*), then the prospect of this hard Brexit on WTO terms is a real one. Whether you voted ‘Remain’ or ‘Leave’, I’m sure no one voted to be poorer, and the current trajectory will make the whole of the UK, not just Wales, poorer. It is true, however, that the economic benefits of being full EU members weren’t felt by many citizens; whether this dividend that the LSE say we’re about to lose was able to trickle down or not is a symptom of an issue much deeper than whether we are members or not of the EU. If we do eventually leave, the inequality and discontent felt in society will remain, except the scapegoat of the EU won’t be around anymore.

Wales was repeatedly promised during the EU referendum campaign that not only would we continue to receive current levels of funding, but they’d continue beyond 2020. Brexiteers in government have had numerous opportunities to demonstrate to Wales they intend to keep to their word, but time and time again, the issue has been avoided. Most recently, the electrification of the Great Western railway line to Swansea was dropped, at the same time financial backing was given to a new Crossrail 2 project and a few weeks after the DUP were bribed with over £1 billion in extra funding for Northern Ireland.

If this is what we can expect from Brexit Britain, Wales is in for a rough future.

As more and more detail of what the future relationship with the rest of Europe could be, it’s vital that the debate continues alongside, and as soon as the final ‘deal’ or ‘no-deal’ is found, we must be ready to ask everyone in the country: “Is this better than the deal we had on the 23rd of June 2016?”. If not, then we should be allowed to change our mind.

A great statesman once said that “if a democracy cannot change its mind, it ceases to be a democracy”.

Oh, that’s right, it was Brexit Secretary David Davis.

Peter Frederick Gilbey, Director of Wales For Europe