Brexit, Bristol and business

Business was never unified on its stance towards Brexit, and very few assessments have studied how it will affect local economies.  Might Bristol be the place to start?

Bristol city centre at night. Luke Andrew Scowen/Flickr. (CC 2.0 by)

Glenn Morgan is Professor of Management at the University of Bristol

In the run-up to the Brexit referendum, there was a common assumption that business was strongly in the Remain camp. This suited the purposes of those determined to paint the issue as one of the elites versus the people. It was never an accurate portrayal of the situation. Instead, businesses tended to line up along the narrow lines of their commercial interests or to remain on the sidelines (as was the case with large retailers such as Tesco and Sainsburys).

The City of London, which has gained from being inside the EU, predominantly backed Remain though some of the more activist hedge funds openly supported Leave. The car industry, predominantly owned from outside the UK but deeply integrated with the EU in terms of markets and supply chains, supported Remain. Other large manufacturers, most obviously Dyson – for whom the EU was only a small part of their overall market and whose supply chain stretched into Asia rather than the EU – were more critical of Remain. They were skeptical of ‘Project Fear’ and the idea that Brexit would cut off EU markets to any significant degree. They also saw advantages in getting out from under what had become portrayed as ‘gold-plated’ EU regulation.

Smaller businesses were also split. If their markets and supply chains were mainly based in the UK, then Leave offered the opportunity to reduce what was seen as a regulatory burden. This position, though, might have been be tempered if they depended on EU workers to fill labour market gaps, as was the case for farmers and food supply. Other small and medium sized enterprises (SMEs) might have specialist markets or specialist positions in global supply chains that are predominantly EU based or more global in nature, and this affected their approach to the referendum.

This led to the British Chambers of Commerce (BCC) to declare they were officially ‘neutral’, though its director-general, John Longworth, spoke in favour of Brexit which led to him being forced to resign. In comparison to the 1975 referendum, business was not united around a vision of the future. Businesses looked more directly to their own interests and, in a period of globalisation, these were distinct and divided depending on markets, supply chains, and degree of dependence on EU labour (both skilled and unskilled).

Without common cause

During the referendum these sorts of distinctions were drowned out, but as negotiations with the EU at last come into sight they are likely to re-emerge. The basic problem arises from the combination of different business interests and the multiple uncertainties of the negotiation process. During the referendum campaign and the period since, there has been very little effort to map the different ways in which businesses, for example in a local area like Bristol, have become integrated into networks that are dependent on the EU context and how these different interests are articulated.

For some businesses, key questions arise in terms of maintaining their supply chains; others are more concerned with market access and their links with retailers, wholesalers and customers in the EU. Others are focused on maintaining access to the pool of EU skilled and unskilled labour. For others, EU funds have played an essential part in developing research and development collaborations between business and universities; how will these be sustained? Will these disruptions persuade some businesses to move to the EU or are there sufficient advantages in the UK context to retain them here?

What is likely is that, no matter how Brexit occurs, existing EU networks will at a minimum be disrupted in some way. How can businesses maintain their old networks in new circumstances; how can they substitute for them if necessary; how can they make do without such linkages and build different ones in a new future? All this depends very much on the eventual deal which is agreed, and as long as the contours of this remain unclear many businesses will choose to bide their time.

Searching for clarity in a diverse economy

How can university-business collaborations such as that currently being developed at the University of Bristol contribute to clarifying the issues during the period of negotiations? One way is to develop a clearer map of how the various components of the local economy have become networked (or not) into the EU and therefore the scale and scope of the possible effects of various forms of Brexit.

Initial research by the Centre for Cities, for example, stated that 66% of exports from Bristol went to the EU, making it the third most dependent city in the UK on EU exports. Unlike some cities, Bristol’s EU exports are not dominated by a small number of companies. They appear to be spread across some large companies such as Airbus UK (owned by the EU headquartered Airbus Group) and Rolls Royce but also a range of small and medium sized enterprises.

As well as manufacturing, Bristol has both a flourishing services sector, including financial services and legal services, and a dynamic creative industries sector characterised by a range of small recent start-ups in film and animation, live and recorded music, computer apps, games and software, artistic representations and architecture, restaurants and food. These are linked to larger entities such as BBC Bristol, ITV West, Hewlett Packard, Bristol airport and the two universities.

Creative industries are particularly dependent on being open to highly skilled migrants, who often emerge from the local universities. They are also important to maintaining the attractiveness of Bristol as a tourist centre. The growth of regional airports and associated tourism services, as has occurred in the South West, has been strongly driven by ease of movement for individuals and airlines around the EU.

The universities themselves are characterised by international faculty with substantial EU presence, powerful research links into the EU, and an ability to attract EU and overseas students. The local Bristol health economy, like the UK as a whole, draws significant parts of its skilled and semi skilled workforce from other EU countries. A recent House of Commons Health Select Committee report stated that 60,058 EU national staff were working in hospital and community health services (HCHS). EU national staff make up 5.1% of the workforce in the UK and doctors have the highest proportion of EU staff at 9.3% of the workforce.

Moving forward

A systematic impact assessment of how Bristol and its local area have been linked into the EU could be conducted collaboratively by the universities, the local authorities, local business associations and employers. It would ideally focus on key sectors like those mentioned in the previous paragraphs as well as on the nature and degree of dependence local businesses and public sector organisations had toward EU networks pre-Brexit. Key dimensions would be manufacturing and service exports to the EU, links into EU global supply chains, dependence on flows of skilled and unskilled migrants, and EU funding of R&D projects linking industry and universities.

The purpose of such an investigation would be to identify and if possible quantify key dependencies, and thus show where we must focus to build a deal that might protect these assets. Where such protection is not possible, it would also show where and how new networks can be built and how collaborations between local business, universities, public authorities, and citizens can make this possible.

We must also take seriously arguments that leaving the EU may have positive effects on business. This, admittedly, is difficult to assess as it is speculative and often relies on a combination of boosterism about ‘British ingenuity’ and a faith in the ability to negotiate new, more favourable trade treaties. That said, certain claims – for example, that removing certain EU regulations would enable particular firms to be more competitive in global markets – are possible to examine already. Which firms might benefit from such changes and why – other than the broad macroeconomic and political reasons referred to earlier – has been rarely explored at a local level. What light would a study of the Bristol area shed on this?

At present impact assessments tend to be at the macro-level. They do not address local specificities and they are not helpful to local authorities, local business associations, firms and organisations in identifying their particular needs in ways which allow regional input into the Brexit negotiations and their aftermath. The #BristolBrexit discussions could be the basis for such an assessment, which could provide for one city at least an evidence base to understand the impact of Brexit and how businesses and organisations can begin to prepare for the changes ahead.

#BristolBrexit – A City Responds to Brexit
#BristolBrexit – A City Responds to Brexit is a free public event at @Bristol on the 23rd of May from 10.00-13.00. The event, organised by the University of Bristol in collaboration with the University of the West of England and the University of Bath brings together stakeholders, practitioners, activists, educators, business people, city officials, religious leaders, and charity representatives to collectively and collaboratively address the challenges of uncertainty brought about by Bristol. The event will feature a series of interactive formats to bring representatives from across the city together to develop new and innovative strategies for taking Bristol into the future.
All are invited: register here.

This article has been written by a participant in the #BristolBrexit – a city responds to Brexit initiative. The views expressed here are personal views and do not reflect the views of the University of Bristol or the funders of the organisers’ research.

This article was first published by openDemocracy under a Creative Commons Attribution-NonCommercial 4.0 International licence.