Opinion: Brexit's impact on the south of England

South east England one of the UK's most successful regions. According to the Office for National Statistics, gross disposable income per person is £20,434, second highest after London (the national average income per head is £17,965).

Steven McGuire
Steven McGuire

This wealth is not generated by a large manufacturing sector – the south east’s share of manufacturing employment is approximately half the national average – but rather by an extensive services sector.

The area has also seen recent success stories in a number of up-and-coming industries such as the digital cluster in Brighton and the expanding wine industry across Kent, Sussex and Surrey.

In addition, the region is home to some of the country’s most important gateways for international trade, notably Gatwick and Heathrow airports but also major seaports as well as the Channel Tunnel.

The labour force in the south east is well-educated and has significantly more professional and technical workers than the national average.

Much of the current commentary on Brexit refers to possible job losses in three areas: finance, agriculture and manufacturing. Of these three, the south east is most directly exposed to job losses that would result from banks and insurers relocating to EU member states to retain market access.

According to the ONS, the south east has around 38,000 people employed in the financial sector. Brexit will have another (indirect) impact on services in the region: many services ‘piggyback’ on manufacturing and agriculture. That is, they arise because of manufacturing done elsewhere. Think, for example, of jobs in marketing and advertising that, whilst based locally, might be done to support a product manufactured in the Midlands. Thus, job losses in manufacturing - even in other parts of the country - can have knock-on effects for service providers. Trade in services is an area of UK strength. The EU is our largest market for services – worth about £17 billion – and is about twice the size of our service exports to North America. Indeed, the UK’s service exports to the US actually declined slightly in 2015 (the most recent data available). Any serious loss of EU market access for services would have a significant impact on the south east, given its employment pattern.

One of the biggest effects that will be seen in the region, given its importance as a gateway, will be the effect on logistics. The south east has higher-than-national average employment in logistics. All of its airports, seaports and the Channel Tunnel will now have to consider how they will deal with UK customs controls as well as immigration. Seaports and airports will need to expand inspection facilities for goods like meat and vegetables. This will require investment in people (which highlights a potential positive impact in terms of employment) as well as new facilities.

The south east will thus be most adversely affected if any post-Brexit deal does not contain enough market access for services. However, given the nature of the workforce, the region has an ability to adapt to the post-Brexit economic environment than others.

Steve McGuire is Professor of Business and Public Policy at the University of Sussex, head of the School of Business, Management and Economics, and fellow of the UK Trade Policy Observatory. Visit: blogs.sussex.ac.uk/uktpo