Brexit - the massive cost for the UK regions

Julian Francis
26 July 2016

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As the dust from the EU referendum result and the corresponding political explosions begins to settle, Julian Francis takes the opportunity to look at the realities of Brexit and what it could mean for the infrastructure industry. 

One of the most famous phrases in politics is if you want to know the truth, follow the money. This is what I have done by examining the degree to which various parts of the UK are dependent on EU spending. What I have found has given me reason to pause.

The scale of funding at risk is huge and is likely to be felt disproportionately in more deprived areas if it is not replaced beyond 2020. England receives almost £5.6 billion a year alone, which is shared between its 39 Local Area Partnerships (LEPs), Wales receives £1.9 billion, Scotland £720 million and Northern Ireland £414 million. A large amount of this £8.6 billion total will be used on local infrastructure spending such as local road improvement schemes and new bridges.

The Northern Powerhouse alone stands to lose £2 billion in funding, which is currently provide to the eleven LEPs that cover the region. The loss of such a large sum could have a significant impact on the development and delivery of the schemes at the heart of the Powerhouse.

Any slowdown in the roll out of the Powerhouse will also impact on the growth of the UK economy at at time when sustained growth is needed now more than ever. 

Areas that are most deprived and which voted strongly for Brexit stand to suffer most from lost funds. The Northern Powerhouse alone stands to lose £2bn in funding, which is currently provided to the 11 LEPs that cover the region.

The areas that are most deprived and correspondingly voted most strongly for Brexit stand to be the ones that suffer most from this removal of funding.

This has the potential to create a serious problem for the government going forward, especially given the fact that Theresa May placed such emphasis on governing for the whole of the country and not just parts of it when she made her first speech outside Number Ten.

Just to give you a feel for the enormity of the issue we face, it is worth studying a few figures for the regions in terms of the amound of EU funding they receive.

• Wales’ £1.9 billion of EU funding a year which equates to £627 per head;
• Cornwall receives £476 million or £863 per head; 
• Tees Valley receives £162 million or £243 per head 
• North Eastern receives £430 million or £221 per head.

If Theresa May is truly committed to ensuring that the most deprived areas of the country receive a more equitable share of the national wealth, plans must now be developed for how this regional funding will be replaced post-2020 and the UK’s withdrawal from the EU.  

The referendum campaign and its aftermath exposed the extent to which people in the poorest places feel shut out from the benefits of the country’s prosperity. These figures show the challenge in ensuring they do not fall further behind from lost EU funding after 2020.

While Britain remains a member of the EU, funds already secured should surely continue to be received, but local authorities and our industry will need to lobby strongly at national and European levels to make sure commitments are honoured. LEPs will also have a key role in gearing up for change.

What happens during the negotiation period and after that is far from clear. Hard-line negotiators may look to sideline British bids, especially where the UK will formally cease to be a member during the lifetime of the funding programme.

Local authorities need to ensure that their voice is not drowned out by other sectors dependent on EU funding. Our industry can be a powerful ally in their campaigns for regional funding.

The terms of the final Brexit agreement will set out what, if any, access Britain has thereafter to structural funds, but it would seem unlikely that current levels of access will continue. Brexit supporters argued during the campaign that EU programmes could be run more effectively by the UK government and that funds currently paid to the EU could be freed up for “other priorities” when outside of the EU.

Local authorities will also need to make sure their voice is not drowned out by other sectors dependent on EU funding and our industry can be a powerful ally in their campaigns for regional funding.

Much media coverage has focused on the impact on other sectors, such as higher education and agriculture, but we must not be shy in trumpeting the needs of our own industry. We will need to work together to ensure our sector’s voice is heard and that there is no loss of funding for vital projects. 

Julian Francis is director of policy and external affairs at the Association for Consultancy and Engineering.