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The impact of Brexit (leaving the EU) on our city and region

July 12, 2018 2:36 PM

EU Brexit protest ParliamentTwo years ago the UK voted by a small margin to leave the EU, Liberal Democrats Cllr Wendy Taylr has reminded Councillors in Nerwcastle. People voted for many reasons, but at the time few people really knew the details of what leaving the EU might mean, particularly for our region. Two years on from the referendum we're not much further forward. The Government is in total disarray with the Tory Party lurching from crisis to crisis as they try to pander to the Mogglodites on the right, while trying stopping the pro Remain Tories from putting their country before their party. And in the meantime the Government is failing to tackle the issues that matter to people in the North East- the NHS, social care, education, housing, environmental sustainability and employment. What a splendid opportunity for her majesty's opposition to make the case for avoiding the biggest strategic mistake this country has ever made. As both Phil Wilson the MP for Sedgefield and Keir Starmer have said the country voted on the principle of leaving, not on the terms. The detail is therefore important. Unfortunately the Labour leadership has totally failed to show real leadership on this issue, either tamely leading MPs to vote with the Government or ordering Labour MPs and Peers to abstain on crucial votes. We are delighted that so many Labour Peers have ignored this advice, but seeing Labour MPs split 3 ways on a vote to stay in the EEA must have left the Tories laughing all the way home.

Of course the reason the Labour Party's appalling performance as an opposition is that they are also split down the middle on how to proceed. If Jeremy Corbyn had fought the referendum campaign with even a fraction of the energy and enthusiasm he displayed in last year's election, we wouldn't be in the mess we are now. But then Jeremy Corbyn doesn't really believe in the EU, so perhaps it's not surprising that he's shown so little leadership on the issue.

We applaud the courage of NE Labour MPS Catherine McKinnell, Bridget Phillipson, Phil Wilson, Paul Williams and Anna Turley who have broken ranks with Jeremy Corbyn by agreeing that voters should be given a final say on the Brexit deal .They have said that the North East's status as an exporting powerhouse could be put at risk if a bad Brexit deal is agreed.

The MPs pointed to some of the region's biggest manufacturers - which employ thousands in the region - and said these firms see their future within the EU customs union and single market.

Writing in The Independent the MPs said: "How do we decide if the deal we are offered on Brexit is the right one for the Northeast?

"Will it be good enough for the exporters who provide so many of the jobs on which our regional economy depends?

"Companies such as Nissan in Sunderland, Hitachi in County Durham and those in the chemical processing industry on Teesside provide thousands of jobs and see their future as part of the EU customs union and single market.

"We would hate to see the growth and employment opportunities they offer be undermined by a bad deal."

The MPs also raised the question of whether the NHS would be able to find the vital staff it needed if the UK cut itself off from Europe and they stated that he outcome of the negotiations will affect the Northeast of England and the United Kingdom for decades to come. Because this is so important, they believe the British people should have their say on the final Brexit deal.

We agree with them, as do the 100,000 people who marched through London last Saturday for the People's Vote

So why will the North East be so badly affected by leaving the EU We are a manufacturing and exporting region. The North East is expected to experience a particular impact as a result of its disproportionately large trading relationship with the European Union in manufacturing Many thousands of jobs-around 150,000 in the north-east of England and millions across the UK-depend on exporting to our European partners. Leaving the EU's single market, which is the world's largest free trade zone, would hit our trade and investment and increase unemployment.

Because we make things, this region had a positive balance of trade. We manufacture cars, trains and pharmaceuticals. We have huge supply chains in support of our manufacturing. It will increase unemployment significantly if we leave the European Union. The north-east of England simply cannot afford the cost of Brexit. It is a massive own goal disrupting our economy and the livelihoods of very many households.

The many foreign inward investment projects that came to the north-east have also been put at risk Why would an overseas company seeking to expand in the EU want to put itself outside the single market, facing tariff barriers to its exports?​ The warnings from Hitachi and Nissan should have been taken seriously. They want us to be in the single market and their views matter profoundly. The north-east needs the jobs and the prosperity they bring. Yet the latest figures show that investment in the car industry has halved in the last 12 months, likely due to anxiety surrounding Brexit.

Nationally first Airbus, then BMW and now Honda have warned of the dire consequences of a 'no deal' Brexit and the continued lack of clarity over the UK Government's position on customs and regulatory alignment. It's no longer Project Fear but dawning reality.

The North East Brexit Group - which comprises business groups, unions, universities and charities - including the North East LEP, the North East England Chamber of Commerce , the region's four universities and the North East Combined Authority was formed to provide a collective voice for the region in the Brexit negotiations. Its recent report is based on evidence from a wide range of Government, academic and business sources.

The report says the UK must ensure that it retains access to the Single Market, have an open trading regime and maintain a stable regulatory framework with the European Union to minimise the impact of Brexit on the North East economy . The report highlighted widespread concerns across the region's business community about future trading arrangements and added to previous warnings that the North East stands to lose the most from Brexit, with the region's key automotive and pharmaceuticals sectors particularly at risk.

There may have been a short term benefit for NE exporters from the devaluation of sterling. However,overall balance of trade values have changed to put the North East in a net importing position for the first time in many years.

"There is evidence that business confidence in digital and transport sectors has already been affected with some decisions having been made to locate investment in Europe rather than in the North East and evidence that some new business contracts have not been won as buyers have chosen to work with EU-based partners.

In addition to manufacturing, sectors such as farming, science, higher education, tourism and hospitality will be adversely affected by Brexit, and the north-east of England will lose access to hundreds of millions of pounds of EU funding for regional development. The success of our universities relies heavily on EU research funding and our businesses rely on free movement of skilled workers both to and from the UK to drive growth and jobs.

The vote to leave will cause immense damage to our economy, to our growth prospects and to the prospects of our next generation.

So why won't the Labour party leadership join the Liberal Democrats, the Green Party, and many Labour MPS and peers in calling for a referendum on the final deal with the option of staying in the EU if the deal is unacceptable. We're told that's not democratic, that the people made their choice, but the vote was close and people voted for many different reasons. Saying we can't ask them to change their minds is like saying that we shouldn't try to persuade people who voted Tory in the last GE to vote differently next time. If it was democratic to reverse a referendum result from 40 years ago, why is it undemocratic to try to reverse a decision from 2 years ago?

In October there will be a deal presented to Parliament- no more lies, no more unrealistic assumptions, no more wishful thinking. People in the North East and elsewhere will know exactly what Brexit will mean-they have the right then to decide if they agree with the deal or would prefer to remain in the EU, they deserve a referendum on the final deal.

Counciillor Robin Ashby added :

The effect of leaving the European Union may be little short of catastrophic for funding for new commercial, infrastructure and housing projects in the region. While the Government has given assurances that existing projects will continue, fine words about the future butter no parsnips. 64% of our funding streams for the period 2015-2021, totalling almost three quarters of a billion pounds, is supposed to come from the EU.

Will they be replaced? Our specialist agencies very much doubt it. Close to home, in his report to our April meeting Cllr Bell described a number of important projects in the City part funded by the European Social Fund or the European Regional Development Fund.

But I'd like to focus on one often overlooked aspect of Brexit - that we will lose access to the European Investment Bank (EIB) This risks a lasting negative impact on investment in our communities, including reducing the number of homes that can be built.

The EIB typically offers a cheaper long-term source of finance than is available from many private equivalents, and it is often willing to invest in slightly higher risk projects than many commercial lenders, whilst providing greater protection to the public element of the investment.

Already, there has been a significant decline in those seeking EIB support for investing in UK infrastructure. Only 39 deals with the UK (collectively worth just under €3.1 billion) have been finalised since the referendum. In the 18 months before, there were 74 deals, (collectively worth over four times as much, €13.5 billion).

The UK's share of EIB loans was 10% when the Liberal Democrats were in Government, but fell to 4% last year.

When the British Business Bank launched the Northern Powerhouse Investment Fund, the EIB provided £184 million out of £400 million to channel through Local Enterprise Partnerships. This money is earmarked for microfinance of up to £10,000, for loans up to £750,000 and for equity investments up to £2 million. What happens when this pot is empty?

Other examples of EIB investment include the Housing Finance Corporation, which secured a €1 billion loan from the EIB to expand the Affordable Housing Finance Programme to build over 20,000 affordable homes across the north and elsewhere

We echo the LGA's call to the Government to provide immediate guarantees that equivalent lending alternatives will be made available to councils and SMEs, and for the Government to allow councils to self-finance new homes, lift the housing borrowing cap, and allow councils to use 100 per cent of the receipts from Right to Buy sales to invest in new homes.

And better yet, exit from Brexit.