With a no-deal Brexit still a strong possibility given the lack of progress in negotiations between UK and European Union (EU) officials, it’s important to ascertain the impact that departing the EU with or without a deal could have on the Welsh economy.
According to the Confederation of British Industry (CBI), no country or region inside the UK would be “left untouched by the “fallout” of leaving the EU without a deal. Wales could be particularly affected by a no-deal Brexit, and indeed any kind of Brexit deal, which we’ll look into in greater detail below.
An export deficit with the EU
Almost two-thirds (61%) of goods exported from Wales are distributed to EU nations. That compares with 49% of the UK as a whole. This suggests that if no-deal Brexit trade barriers and WTO tariffs are applied to Welsh exports, this could have devastating effects on Welsh businesses, particularly those in rural areas. We’ll discuss tariffs that could be applied to food and other goods in particular shortly.
Airbus could lead the way in pulling out of Wales
Many of the biggest employers in Wales could choose to move their operations outside of the country in the event of a no-deal Brexit or a Brexit deal that disadvantages UK trade. Airbus, which is said to support some 11,600 jobs throughout its supply chain in Wales, could be one of several large and medium-sized businesses to leave the country altogether. Recently, Airbus has been warned with the threat of additional tariffs from the US – regardless of Brexit – totalling $7.5 billion as a retaliation to illegal EU subsidies to Airbus that hampered Boeing’s growth. It’s a move that could well and truly add fuel to the ongoing global trade war. This, along with the prospect of a no-deal Brexit, is one of the main reasons why forex trading platforms are being utilised more regularly to speculate on the pound against both the euro and the US dollar. Indeed, the pound has certainly been more volatile in recent months, as traders make assumptions on Brexit and other trade issues based on the snippets of information released to the press via the UK government and the EU’s negotiating team.
Hardship in farming
The consequences of a no-deal Brexit could be devastating on the Welsh farming sector, according to projections. Over 90% of lamb reared in Wales is exported to the EU, so tariffs of 50% and upwards could leave farms suffering serious hardship. According to John Davies, president, NFU Cymru, WTO terms would see lamb exports given 46% tariffs, while beef rates could be much higher – anywhere between 48% and 84%.
No more EU funding could curb regeneration projects
Wales is the biggest beneficiary of all UK nations when it comes to EU funding. It received £628 per person in funding as of 2014, which is six times more than funding allocated to each person in England. Wales receives £680 million in annual funding from the EU, all of which will soon disappear, leaving a funding gap for the UK government to meet to maintain new projects and urban regeneration projects, such as Cardiff’s proposed International Sports Village on the Cardiff City Council-owned waterfront site.
Although the confusion and chaos that surrounds recent political developments has led to some people calling for Wales to push for independence from the rest of the UK, an ITV Wales poll earlier in 2019 found that just 12% of the public would vote for independence if a referendum were held. Even a poll by the Welsh nationalist party, Plaid Cymru, found that only a third (33%) of respondents wanted to be independent from the UK, which should quell those calls for the short to medium term.