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East Anglia braces for Brexit: New report predicts economic woe

PUBLISHED: 06:00 29 January 2020 | UPDATED: 08:21 29 January 2020

Pharmaceuticals giant Sanofi has already exported part of the business from its Haverhill site, pictured, to EU countries to insulate it from Brexit  Picture: RICHARD GROVES

Pharmaceuticals giant Sanofi has already exported part of the business from its Haverhill site, pictured, to EU countries to insulate it from Brexit Picture: RICHARD GROVES

Richard Groves/sanofi

Plummeting GDP, labour shortages, a spike in costs ... The New Anglia Local Enterprise Partnership's new Brexit report makes worrying reading for businesses in the East. Sarah Chambers reports.

Philips Avent is vacating its Glemsford plant this year and moving operations to the Netherlands and Indonesia  Picture: PHIL MORLEYPhilips Avent is vacating its Glemsford plant this year and moving operations to the Netherlands and Indonesia Picture: PHIL MORLEY

East Anglia will be particularly badly hit by Brexit, a stark new report has warned.

Along with possible shortages of materials, higher import costs, border delays and a workforce squeeze, it is predicted that Gross Domestic Product (GDP) in 10 years' time will be 4% smaller overall - with that figure reaching -5.7% in the event of a 'no-deal' departure from the European Union (EU).

This would put Norfolk and Suffolk among the worst-hit regions outside of Aberdeenshire, according to a study commissioned by New Anglia Local Enterprise Partnership (LEP) - 'Potential implications of Brexit for Norfolk and Suffolk' - which is due to be discussed by its board today.

MORE: County celebrates bumper rise in start-ups in 2019 - despite 'turbulent' year

German engineering firm Bosch vacated its  factory in Stowmarket in 2019 and moved operations to mainland Europe  Picture: GOOGLE MAPSGerman engineering firm Bosch vacated its factory in Stowmarket in 2019 and moved operations to mainland Europe Picture: GOOGLE MAPS

It commissioned Metro Dynamics to carry out a detailed analysis of potential impacts across four key sectors for the region - manufacturing, agriculture, energy and health and social care. It looked at potential challenges and opportunities for the workforce, trade, regulations and funding and investment.

Although it suggests there may be a short-lived boost to the economy this year because some uncertainty is removed, growth is expected to return to "subdued levels" of 1% in 2021/22.

A 'no-deal' scenario at the end of talks with the EU - which the UK has scheduled to start and end this year - would hit GDP even harder with a 5 to 6% drop in GDP growth relative to staying in the EU.

"National Institute of Economic and Social Research (NIESR) modelling suggests that East Anglia will be one of the areas most affected by a no-deal Brexit, suffering a -5.7% decrease in GDP in 2030 relative to remaining in the EU," the report says.

Brexit presents opportunities for Norfolk and Suffolk as well as challenges, says Chris Starkie  Picture: JAMES BASSBrexit presents opportunities for Norfolk and Suffolk as well as challenges, says Chris Starkie Picture: JAMES BASS

Overall net migration is expected to decline - leading to worker shortages among some Suffolk and Norfolk businesses.

Businesses in the two counties which rely heavily on semi-skilled or low-skilled labour from the EU - which makes up a significant part of their migrant workforce across sectors in including agriculture, health and social care, and energy - are likely to find themselves at the sharp end.

"Short-term UK-EU migration flows are likely to be very low, squeezing business' access to labour," the report adds.

Trade could be affected on a number of fronts, with border delays, new tariffs, probable short-term disruption to exports due to bottlenecks - and a possible 'second wave' of export decline due to businesses relocating from the UK to the EU.

Regional impacts of 'no-deal'  Picture: METRO-DYNAMICSRegional impacts of 'no-deal' Picture: METRO-DYNAMICS

Evidence suggests that some have already voted with their feet, relocating - either partially or fully - to the EU.

German multinational engineering firm Bosch transferred its garden machinery operation from Stowmarket to Hungary at the end of last year with the loss of 135 jobs.

Drugs company Sanofi decided in 2019 to plan for a hard Brexit and diverted some of its very lucrative 'label and pack' rare diseases medicines operations from Haverhill to France and Ireland with the loss of 24 jobs because of potential complexities around moving pharmaceuticals to the EU.

Baby bottle making business Philips Avent is set to close its plant at Glemsford this year, with the loss of 425 jobs, and relocate to the Netherlands and Indonesia.

EU workforce in Norfolk and Suffolk  Picture: METRO-DYNAMICSEU workforce in Norfolk and Suffolk Picture: METRO-DYNAMICS

US-owned Delphi Technologies is closing its Sudbury plant this year to move to Romania with the loss of 200 jobs - the remnants of a much larger workforce of 500 in 2017 since when many have taken enhanced redundancy packages.

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The UK's slow productivity growth has been affected by uncertainty about our future relationship with the EU, with businesses preferring to take on more workers than invest in capital, the report suggests, while reduced access to EU labour may result in further inflationary pressure on wages, particularly in sectors where EU nationals form a significant part of the labour market.

However, for those able to navigate a general downturn in global trade, the devaluation of the pound - which has fallen in value by 15% since 2016 - has increased the competitiveness of UK-made goods, the report suggests.

Total UK trade - both imports and exports - is expected to decline, with imports becoming expensive because of the pound's reduced purchasing power.

But the Withdrawal Agreement does open up opportunities to strike trade deals with other countries which might suit the UK better, it says.

LEP chief executive Chris Starkie said: "Brexit presents opportunities as well as challenges. We can play a key role in this process, providing businesses with the support they need, whether that's helping them to enter new domestic markets, incorporate local businesses into their supply chain or capitalise on a weaker pound. We will be looking for ways to uplift the local economy, using innovation and technology to upskill our workforce and create better-paid jobs.

"Over the coming months, we will be working with government to ensure future regulatory arrangements benefit Norfolk and Suffolk's key sectors, while safeguarding consumers from poor quality products and services. We will also use our Local Industrial Strategy to articulate the region's priorities and how any future agreements can support these."

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