South West consumers could end up ‘paying the Brexit bill’, experts have warned, after new figures revealed just how much European businesses add to the regional economy.
The South West benefits disproportionately from the large contributions by foreign – and especially EU-owned non-financial businesses of any region in the UK.
EU-owned businesses in the South West contribute more than £15bn to the region’s economy.
This is a disproportionately high figure – EU-owned businesses generate almost 10 per cent of the total gross value added (GVA) from all South West businesses even though they make up less than two per cent of all companies in the region.
Allie Renison, Head of EU and Trade Policy at the Institute of Directors told us her concerns about what the situation could look like post-Brexit:
“The large contribution that these firms make to GVA does create a concern about what would happen if they began to plan to scale investment back here.
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“One particularly important factor here is the lack of clarity for existing EU workers in the UK, and the unclear prospects for future movement of workers between the UK and EU.”
She added that the Institute of Directors has been appealing to the Government to prioritise negotiating a deal with the EU in this particular regard.
Ms Renison hopes that EU-owned firms will lobby both sides of the negotiating table ‘to push for a Brexit deal that keeps the level of friction for trade to an absolute minimum’.
“It’s in their interest, as much as it for UK companies, that we get a transitional agreement that takes us smoothly to a new free trade agreement with the EU,” she said.
Brexit is ‘a new synonym for uncertainty’ that is ‘clearly negative for investment strategies and possible expansion plans’, said Dr Pierre Gröning, Director of International Trade Policy at Brussel-based Foreign Trade Association (FTA).
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“While retailers and fashion brands are not able to attach a price to Brexit, they expect to be hit by higher direct and indirect costs, supply chain disruptions, and increased price pressure,” speaking exclusively to us, he said.
“The sector is reluctant to currently invest in the UK because of the big risks and the lack of legal clarity about the Brexit consequences.
“At the same time, we do not predict any major de-investment from EU27-based companies but rather a period of business stagnation and lower profits.
“It is likely that the consumer will end up paying the Brexit bill in the form of higher prices.”
Overall foreign-owned businesses contribute £314bn to the UK economy, accounting for 27 per cent of the total generated by business in the UK.
More than a third of this comes from EU-owned businesses with a share of £123bn.
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