Brexit: the fallout, the future

brexit

By Chris Smith, editor at 24housing. 

All this week, we will be exploring the Brexit impact on housing. We start with the Joseph Rowntree Foundation’s assessment.

As yet, it is impossible to set out what will happen next until after the Conservative Party leadership election is completed at the very earliest.

What is clear is that the current uncertainties will impact on the weakest points in the UK economy, political system and real-world society.

The Joseph Rowntree Foundation (JRF) looks at the impact on poverty and the poorest in communities across the country.

The crux issue is how the hole created in public finances by the loss of EU regeneration money can be filled.

That infamous claim by the Leave campaign that £350m a week of money going to the EU can be redistributed – a claim now discredited – looks an even tougher pledge now.

Regional funding and devolution are big losers but ultimately it’s about who pays for the new normal.

According to JRF, leaving the EU “could lead to a significant devaluation of the pound, with some predicting devaluation of up to 20%. People could be relatively poorer, affording less with their pages in term of buying imports or travelling abroad.

The JRF also considers:

“Leaving the EU could save the UK its net contribution of £9.9 billion which could be spent on poverty reduction. The North East, Northern Ireland and the East Midlands would be hardest hit by any increased barriers to trade with the EU.

Some of the most deprived parts of the UK such as Wales and Cornwall receive £2.1 billion of funding from the EU to support development.

The question of the short and long term effects of Brexit on the UK economy – including its impact on exchange rates, growth, investment and employment – all have direct and indirect effects on the UK’s poorest people and places.

The Treasury released a report in April 2016 that estimates leaving the EU and negotiating a bilateral agreement could reduce British GDP by 6.2% by 2030. Other studies suggest the impact will be more modest, affecting UK growth approximately 1% either way (Open Europe, 2016).

The EU provides development funding to the most disadvantaged regions across the EU (those below 75% of the average EU GDP) including social funds devoted to job and skills training. Wales, for example, received an estimated £249 million in EU structural and cohesion funding in 2012. If we divide the UK’s total contribution to the EU budget by population, then Wales contributed £495 million.

If we add EU investment of £206 million in Wales through the European Agricultural Guarantee Fund (EAGF) and other EU funding sources that year, we can reasonably conclude that Wales receives as much or more EU funding that it contributes per year if measured as a proportion of EU payments (Full Fact 2014). The EU referendum raises the question of how Brexit could impact the UK’s most underdeveloped regions, both in terms of changes to trade and foreign direct investment, and access to social and development funding.

Much of the EU’s direct spending on poverty reduction is channelled through the European Social Fund (ESF) and the Youth Employment Initiative (YEI) and less directly through the European Regional Development Fund (ERDF). In the last round of funding (2007-13), the UK government received £8.4 billion in total (European Commission 2014).

In the current round of funding (2014-20), the UK will receive £8.6 billion or €11.8 billion (current prices) in total funding, of which £2.1 billion will be spent on the UK’s less developed regions: Cornwall and the Isles of Scilly, West Wales and the Valleys. £2 billion will be allocated to ‘transition’ regions – Northern Ireland, the Highlands and Islands, Cumbria, Tees Valley and Durham, Lancashire, South Yorkshire, East Yorkshire and Northern Lincolnshire, Lincolnshire, Shropshire and Staffordshire, and Devon. An open question is how the UK government could address regional inequalities in the UK if it withdrew from these EU programmes.”

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