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UK’s regions could be Brexiting themselves in the foot

by John Springford, Philip McCann, Bart Los and Mark Thissen | 14.06.2016

The Leave camp has signalled that it is going to talk about immigration for the remainder of the campaign. This is not surprising: Brexiteers have struggled to counter the pro-Remain economic analysis from heavyweight institutions – the OECD, the Treasury, the Bank of England and the IMF, to name a few. A relentless focus on immigration keeps the public eye on the common (but erroneous) assumption that immigration depresses wages and piles pressure on public services. It also injects a pinch of identity and class politics into the campaign.

The Brexit campaign’s message that Remain represents rich London-based elites who are the main beneficiaries of EU integration resonates most strongly in regions outside of London whose economies have been struggling since the 2008 crash. But the irony is that it is these regions, not London and its rich commuter belt, that have most to lose from leaving the EU.

Chart 1 shows a positive correlation between a region’s level of economic integration with the EU and that region’s euroscepticism. The vertical axis, based on new data from the University of Groningen, shows the proportion of a region’s economic output which is sold to the rest of the EU – either in the form of exports, or indirectly, with domestic companies supplying goods and services to exporters.1 The horizontal axis is taken from the British Election Survey, which asks people how they would vote in the EU referendum and breaks down to a constituency level. The chart shows that London and Scotland, the most pro-EU areas of the UK, are less economically integrated with the EU than the UK average. Meanwhile, outside the prosperous South-East, rural counties such as North Yorkshire and Dorset, and more urban ones, like West Yorkshire and Lancashire, are more integrated with the EU, and also tend to be more eurosceptic.

Chart 1. UK regions more economically integrated with the EU are more likely to be eurosceptic.

 

 

Chart 1 - Eurozone non performing

Sources: World Input-Output Database, University of Groningen, http://www.wiod.org/, 2010 data; Nick Vivyan and Chris Hanretty, ‘Estimating Constituency Opinion’, http://constituencyopinion.org.uk/data/, 2014 data.

The fact that London sells less to the EU will be surprising – especially to those who think the EU only benefits the ‘metropolitan elite’. There are three reasons why. First, London’s trade is more global. Typically, London sells around 10 percentage points less of its exports to the EU than other regions, in part because the services sector is less dependent on EU demand, and London and the South East are heavily oriented towards services. By contrast, Britain’s manufacturing, agriculture, mining and extraction, and utilities sectors are more skewed towards EU markets, and regions outside of the London commuter belt tend to be more specialised in these sectors.

Second, London’s economy is very large and diverse and every pound of exports emerging from London accounts for a smaller share of the capital’s economy than is the case elsewhere.

Third, London’s diverse economy allows the city to adjust and respond to shocks much more rapidly than other UK regions, as seen in the years since the 2008 economic crisis: London’s economy is growing while other regions continue to struggle. London is therefore both less dependent on the EU, and also more resilient to a post-Brexit shock than all other UK regions.

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None of the usual arguments for why these regions are more eurosceptic – poverty, age, education levels – closely match the data. Poorer regions tend to be more eurosceptic, but the relationship is weak – and if we take London out of the data, it almost disappears. The average age of a region’s population does not seem to make much difference. Education levels are a slightly better indicator – regions with more people who have some tertiary education tend to be less eurosceptic, but the correlation is not very strong.

The best predictor by far is attitudes towards immigration. The British Election Study asked respondents: ‘Do you think that immigration undermines or enriches Britain’s cultural life?’ and asked to respond on a 7 point scale – the lower on the scale, the more a respondent thought immigration undermines Britain’s cultural life. Citizens of regions where immigration is perceived as damaging are much more likely to vote for Brexit (see chart 2).

Chart 2. Attitudes towards immigration and Brexit voting intention

 

Chart 1 - Eurozone non performing

Source: Nick Vivyan and Chris Hanretty, ‘Estimating Constituency Opinion’, http://constituencyopinion.org.uk/data/, 2014 data.

The irony is that these areas tend to have fewer immigrants than more pro-EU regions – and also that they have more to lose economically from Brexit, since their economies are more closely integrated with the EU. Therefore, the Brexit campaigners are quite wrong to imply that the Remain campaign are ignoring the economic interests of people living in the English shires. Quite the opposite: they are trying to encourage people to focus on their economic interests. The reality is that immigration affects many of these regions much less than it does cities, while these regions have closer economic ties to the EU.

At a national level, the referendum debate is boiling down to a trade-off: reduce immigration by leaving, or secure the economy by remaining.

But for eurosceptic regions that trade-off does not exist: by voting to leave the EU, voters in these  regions would shrink immigration to London and other cities – while hurting their own region’s economy.

Edited by Geert Linnebank

2 Responses to “UK’s regions could be Brexiting themselves in the foot”

  • I think the key, as mentioned, is contact with foreigners. I am from Devon but I have lived in multi-racial Reading, spent time in Czech doing a course and work now in Devon but with people from all over Europe. I am avidly pro-EU and have no fears about migration.
    Conversely, my brother and sister have lived all their life in Devon and rarely encounter anyone who is foreign or even black. Consequently they are very pro-Leave.
    It is fear of the unknown again.