Download the full report Taking the temperature of the post-Brexit economy (PDF)
This report looks at what we know about the economic impacts of the decision to leave the EU.
First, however, the report looks at what was happening to working people in the UK before the referendum. Weaknesses in the UK economy were evident well before the vote. The figures show feeble pay growth following years of a pay freeze, a slowing in employment growth, and an increase in insecure jobs.
In the immediate aftermath of the vote, we saw a sharp fall in the stock market, and drops in many surveys of business and consumer confidence. Following the Bank of England’s decisive action to cut interest rates and increase quantitative easing, measures of confidence appear to have stabilised, although there is still little hard data on which to base an assessment.
In the medium term however, there remain risks to jobs and pay arising from the uncertainty about our future trading relationships with the EU and the rest of the world. Many of our convenors report that decisions on investment in their workplace remain on hold, with businesses taking a ‘wait and see’ approach. Any resulting slowdown in growth would have clear impacts for jobs, with current forecasts predicting around quarter of a million job losses into 2017.
One clear indicator we do have is the value of the pound, which has fallen dramatically and stayed down. With this likely to feed through into higher inflation as rising import costs raise the prices of every day goods, the return of the wage squeeze is a distinct possibility. Current forecasts would see working people’s pay rise by just 0.1 per cent next year.
The uncertainty and possible wage squeeze arising during this “phoney war” before Article 50 is triggered, and possibly during Brexit negotiations themselves, are risks that must be addressed. The TUC has called for immediate infrastructure investment from government, not only to build the homes, railways and broadband connections the UK economy desperately needs to boost productivity, but to give businesses the confidence to keep investing and hiring.
But the real economic consequences of Brexit will only be known when the UK does leave. Prospects for workers’ jobs and pay will depend on the terms of trade with Europe and the rest of the world negotiated as part of the Brexit settlement. The TUC believes that maintaining the advantages we get from membership of the single market is the key to a successful Brexit for working people.
These advantages vary by sector; while tariffs are the major issue for some manufacturers, many service industries rely on the removal of non-tariff barriers, for example the application of common regulatory standards.
It is vital that ministers consider both the sectoral and regional impacts of any new trading arrangements. In every English region and Scotland, almost one in ten jobs are linked to EU exports. And initial analysis in this report shows that in every part of the UK except London, manufacturing jobs dependent on EU exports are more significant than jobs in financial services that rely on the EU.
That is why the TUC will argue for a deal that works for all sectors of the economy, and protects the well-paid jobs that boost the low-wage economies of some of our poorest regions. Protecting manufacturing is key to stopping the stark regional inequalities exposed in the Brexit vote from widening further.
Of course, policies to bring prosperity across the UK and boost jobs and pay in the years to come will need to go well beyond an attempt to address the impact of Brexit, and encompass a renewed industrial strategy, reforms to corporate governance, a pay increase for Britain’s poorest workers, and a concentrated attack on insecure forms of work. These will be the subject of future TUC reports.
Download the full report below:
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