Brexit What might it mean for a city like Milton Keynes? Valerie Conway MRICS Development Consultant David Lock Associates
Brexit what is going to happen?
Milton Keynes
Centre for Cities analysis of Milton Keynes:
Centre for Cities analysis of Milton Keynes:
Milton Keynes Economy Q1 2018 Domestic sales slight weakening compared to 2017 Export sales Weak - area of growth Employment Strong and stable Prices Slight inflation Growth prospects Expectation of continued growth Oxford-Milton Keynes Cambridge Expressway Confidence Dropped from 52% anticipated improvement in revenue in Q4 2017 to 15% in Q1 2018 Brexit and Skills shortages blamed Source MK Chamber of Commerce
Milton Keynes Economy Q3 2019 Post Brexit? Domestic sales Steady Unlikely to be significant Brexit impact, but in uncertain times people spend less? Export sales If Strengthens exports will weaken. If tariffs imposed, will weaken/slow down Employment Potential impact in exporting companies if exports fall, BUT bigger impact of ongoing/exacerbated skills shortage, and impact if workers go home? Prices possible inflation, especially if there are tariffs on imports and exports, and increased operating costs to accommodate changes Growth prospects Ongoing, but may not be as positive local issues will still be a key driver Confidence Depends on the final deal if no deal, likely to be very low. Source MK Chamber of Commerce
The bigger picture MK Citizen report 12.2.18 Across the UK, a no deal Brexit could mean: >2.5 million jobs at risk 140 billion economic activity at risk Risk across manufacturing and service sectors Consider supply chain services associated with exporting and manufacturing Loss of more productive workers impact on already poor productivity figures Research findings indicate: 15 out of 54 industries, (20% - 36% of economic activity) at risk, in particular fisheries (MK OK), Chemicals and Motor vehicle manufacturing (MK not OK) Services will be hit hardest: Professional, scientific, administrative, technical. Midlands and the North are most dependant on EU for trade Source: MK Citizen article by University of Birmingham and University of Sheffield
Milton Keynes Some key facts Top 5 industries by no of units: Professional, scientific and technical Motor trade Information and communications Admin and services Construction Top 5 industries by rate of growth over 5 years: Information and communications 55% Public administration 50% Human health and social work 36% Transportation and storage 36% Professional, scientific and technical 32%
Milton Keynes Some key facts Circa 1,500 3,000 international in-migrants per year, circa 1,000-2,000 international leavers. Net addition circa 500-1000 pa less than 0.5% of population will the impact be as big as anticipated? UK HQ for Mercedes Benz, Home Retail Group, Suzuki, Domino s Pizza, Network Rail, Santander, Volkswagen Financial Services. Significant distribution location, but not its biggest business
The Conversation: A longer term view.
What is a Hard Brexit? No Deal, and a return to World Trade Organisation rules: UK Member of WTO in its own right WTO procedures require agreed schedules for tariffs on goods if not agreed, EU schedules for the rest of the world will be used as a default UK would also have to negotiate with countries where EU has free trade agreements Each WTO member must grant the same Most Favoured Nation market access to all others this means imports from/exports to EU would be subject to the same customs checks, tariffs and regulatory barriers as currently apply to the rest of the world. The EU would have to apply the same to the UK. No arrangements are currently in place to accommodate this Less than 9 months to go!!!!... (How long does it take to negotiate a tripartite s.106 agreement??)
What are the possible consequences of a Hard Brexit? Average EU tariff circa 1.5% BUT cars and car parts is 10% - impact on Milton Keynes Car related tariff magnified by multi border crossings High tariffs and quotas on agriculture increased food prices? UK can unilaterally reduce or eliminate tariffs but would apply to all WTO trade impact on farmers and home producers? Border checks, customs controls and regulatory compliance cannot be removed unilaterally Access to single EU aviation market requires HQ and majority shareholdings to be located within the EU Centre for Economic Performance estimates WTO rules Brexit will reduce UK trade with EU by 40% over 10 years impact on all exporters in Milton Keynes
Other potential impacts Smart Cities Programme - 263.84 million invested by the Commission through the Horizon 2020 Smart Cities and Communities programme - what of the future? Capital of Culture bid a lost opportunity! Home of the OU possible loss of EU funding streams Between 2007 and 2016, an average of 40 million was invested in England s arts, museums and creative industries each year, totalling 345 million. Impact on Sharing Culture MK? - a collaborative programme co-ordinated by MK Council. Sharing Culture MK supports the European Commission initiative, European Year of Cultural Heritage (EYCH).
So what is the good news?
And this is my pet Unicorn!
But seriously it is a matter of opinion: Economists for Free Trade estimate UK will gain circa 7% per cent of GDP ( 140 billion) post Brexit The report, New Model Economy for a Post-Brexit Britain, suggests families on 26,000 pa or less will gain 44 a week from Brexit or 2,288 a year, which is 15 per cent of their weekly spend. Low-income families spend disproportionately on food and housing. Leaving the EU is estimated to save 27 a week in cheaper food and falling rents, triggered by a fall in land value. (!?) In addition, low wages are expected to rise 12 pw after a fall in income-suppressing low-skilled immigration and a reduction of 5 a week in costs of migrant benefits.
But seriously it is a matter of opinion: Commentators highlight the benefits the Brexit vote has brought to the wider understanding of the EU and our role within it There remains a view that sovereignty over decision making is an important benefit, as is the ability to restrict the free movement of people. Couldn t find anything else positive!
The wider perspective for MK beyond the EU Milton Keynes Council has signed a three way agreement with the Chinese smart city of Yinchuan and Chinese telecom to work together on smart city projects. This shows MK will continue to play a leading role in the global smart city movement. During Global Entrepreneurship Week 2017, entrepreneurs from Milton Keynes joined business leaders from India at the Houses of Parliament. One leading business said: Milton Keynes is the best place to support our ambitions of expanding into the UK thanks to its affordable operational costs, a wealth of support for new businesses, close links to London by train and ability to travel quickly by plane to our European office in Madrid from London Luton Airport Ruby Parmar, office senior partner for PwC in Milton Keynes, said: "Milton Keynes is recognised as a centre of growth and its position in the wider region s economy is well regarded. The city and the surrounding area has a diverse, innovative economy that is well placed to weather any economic uncertainty caused by the Brexit vote.
Conclusions The UK has voted to leave the EU There is currently no clarity as to what this means Businesses are starting to complain publicly against ongoing uncertainty (Airbus, BMW, Nissan, Rolls Royce, BP, Nestle, Vodafone, Deutsche Bank, Chubb ) Uncertainty is bad for business decision making RISK Such uncertainty cannot be a good environment for commercial centres such as Milton Keynes As to the long term impact..who knows!