Aberdeen would be the British city hardest hit by Brexit, with Edinburgh not far behind, according to a new study by the think tank Centre for Cities and the Centre for Economic Performance at the London School of Economics.
The report said the Scottish cities would be among the hardest hit by the likely downturn in trade after the UK leaves the EU, regardless of whether they face a “hard” or “soft” Brexit.
The report predicted Aberdeen would be the hardest hit with reduction in economic output (gross value added) of -3.7% under a hard Brexit and -2.1% under a soft Brexit.
It predicted Edinburgh would be the sixth hardest hit with reduction in economic output of -2.7% under a hard Brexit and -1.4% under a soft Brexit.
The study said successful cities with large high-skilled service sectors — which are mainly in the South of England — will be hit hardest by the likely downturn in trade after the UK leaves the EU.
“However, these cities are better-placed to adapt to the economic shocks ahead than less affluent places … despite the latter being less directly affected by Brexit,” said the report.
The research shows that all British cities are set to see a fall in economic output as a result of leaving the EU, because of the predicted increase in trade costs that both a hard and soft Brexit will bring.
The report said the economic impact will be almost twice as big in the event of a hard Brexit, which the research predicts will bring an average 2.3% reduction in economic output across all UK cities — compared to a soft Brexit, which will result in a 1.2% decrease.
The report also suggests that in both scenarios, it is economically vibrant cities which will be hit hardest and most directly by Brexit.
“This reflects the fact that these cities specialise in large knowledge-intensive sectors such as businesses and financial services, which the research shows will be most affected by the increase in tariff and non-tariff barriers that Brexit could bring,” said the report.
Andrew Carter, chief executive of Centre for Cities, said: “All UK cities face significant economic challenges after we leave the EU, but the impact of both ‘hard’ or ‘soft’ Brexit will be felt very differently across the country.
“Contrary to much of the received wisdom on Brexit, it is the most prosperous UK cities which will be hit hardest by the downturn ahead – but poorer places across the North and Midlands will find it tougher to adapt.
“First and foremost, the Government should do all it can to minimise the coming economic shocks by securing the best possible trade deal with the EU.
“That means ensuring that our post-Brexit trading arrangements are as close to our current relationship with Europe as possible.
“But it’s also critical that the Government uses its forthcoming industrial strategy to give cities across the country the investment, powers and responsibilities they need to make their economies as successful and competitive as possible.
“This will be crucial in helping cities to respond to the changing economic circumstances as we leave the EU, and to address the other big challenges they face in the coming years such as globalisation and automation.”
Professor Stephen Machin from the Centre for Economic Performance said: “This research shows that focussing on the likely local economic impacts of Brexit will be a critical ingredient for policymakers when thinking about how to offset the negative economic effects that loss of trade due to Brexit will bring.
“A hard Brexit would amplify the negative impact of leaving the EU on local economies across the UK.
“The estimated decline in economic activity is higher in richer local economies like London.
“But Brexit – whether hard or soft – would still hurt economic activity in poorer areas like Hull and Burnley that have some of the lowest incomes in the country.
“The fact that the industrial specialisation and the skill and knowledge intensity of different places are key to local impact should be of significant importance to the design and implementation of policy, especially in the arenas of industrial, skills and labour market strategies.”