EU referendum result – reaction from SPERI researchers

Scott Lavery and Owen Parker, co-leaders of SPERI’s European Capitalism and the Future of the European Union research programme, have responded to today’s EU referendum result.

Scott Lavery:The ‘Leave’ victory was delivered by larger than expected turnouts and victory margins in generally poorer areas of England and Wales. In particular, working class communities in the North East and East of England, the Midlands and Wales came out in large numbers to vote for Brexit. The greatest irony of the Leave vote, however, is that it is these poorer regions and working class communities which are most likely to be adversely affected by the economic consequences which will now follow the referendum result.

The value of Sterling has already fallen to a 30 year low. In this situation, there is a danger of further capital flight, as investors withdraw their money from the UK economy in the face of economic uncertainty. This means that over the coming weeks and months the Bank of England may come under pressure to instigate an interest rates rise to protect the value of Sterling. In the context of an already fragile economic recovery, this could potentially pitch the UK economy back into a recession and put a further strain on already highly indebted British households. This, in combination with possible further rounds of public spending cuts from the Conservative government to stabilise the value of the pound, could have a devastating impact on the poorer UK’s regions.

In addition, and as outlined in SPERI research prior to the referendum, poorer regions receive far more in structural funds from the EU than richer regions in the UK. Wales and Cornwall, for example, are net recipients of structural funds which have helped fund jobs growth, investment and business activity in these areas. Regions in the North of England have also been more reliant on the EU for export markets in goods than the national average. The Leave vote puts both of these links between poorer regions and the EU into jeopardy, with potentially very damaging consequences.

Owen Parker:The challenge in the UK in the aftermath of this vote will initially be to contain the nationalist — and in some cases outright xenophobic and racist — forces that the referendum campaign has unleashed and to some degree legitimised. With respect to addressing the underlying concerns of these particular groups that will, in particular, require some serious soul searching in the divided Labour party as to its future direction of travel and, ultimately, its willingness and ability to challenge a neoliberal agenda. Those politicians who persuaded these groups to back Brexit are unlikely at the best of times to support higher public spending or regional investment and certainly not if the widely predicted economic downturn materialises.

You can also read comments on the EU referendum results from SPERI Associate Fellows Jason Heyes (Professor of Employment Relations) Tim Vorley (Professor of Entrepreneurship) and James Wilsdon (Professor of Research Policy), and from other academics from the University of Sheffield, here.