With the end of the Brexit transition period fast approaching, securing a trade deal with the European Union is increasingly pressing.
How dependent are British cities on trade with the European single market? And which would be likely to be the worst affected if we were to leave without a trade deal?
The EU is the most important trading partner for Britain
In 2019, Britain exported almost £300bn of goods and services to the EU. The majority of these exports (62%) came from our cities. Examining how cities in Britain trade internationally is important to understand how reliant the nation is on EU trade as a whole, as well to see how any new trade deals are likely to benefit different places.
The EU is the largest market for exports from every city in Britain
Not only is the EU export market crucial for the country as a whole, but it is also vital for individual cities. The EU is the most important trading partner for every city in Britain, making up at least 32% of exports in each location.
The cities most reliant on trade with the EU are Telford, York and Wakefield, with more than 66% of exports in these places heading to countries in the European bloc (see figure 1).
Meanwhile, at 32%, 33% and 34% respectively, Derby, Coventry and Gloucester exported the least to the EU (figure 2). But it is important to reiterate that, even for these cities, the EU is still their largest importer of goods and services.
As shown in figures 1 and 2, although places across Britain export high shares of goods and services to the EU, this varies between regions.
Looking at the ten cities that export the most to the EU, all but one of them are located outside the greater south-east of England, with most in the north of England. At the other end of the spectrum, of the 10 cities that are the least reliant on EU trade, half are located in the greater south-east of England. This means that if we fail to reach a good deal with the EU, or don’t reach a deal at all, this will make levelling up areas outside the greater south-east of England even harder.
The trade of both goods and services to the EU is important
Cities benefit from an arrangement with the EU that allows the frictionless trade of both goods and services. As shown in figure 3, some places rely more on the EU to buy goods and others more as a purchaser of exported services.
In three out of five cities in Britain, the EU is the largest importer of goods compared with all other countries combined. Wakefield, Telford and Sunderland export the highest share of goods to the EU, with more than 56% of the total exports from each city heading to the EU. The export of road vehicles is the largest sector in both Telford and Sunderland, while in Wakefield the export of plastics, including from the large Coca-Cola bottling plant, plays a large role.
Cities in Britain send 40% of their exported services to the EU. This includes some of our most productive cities, which depend on selling their services to the bloc – in Edinburgh, Cambridge, Brighton and London, more than 30% of their total exports are services headed to the EU. The largest exporting service industries in these locations are information and communication as well as financial and insurance activities.
London’s services sectors are heavily reliant on the EU as a trade partner
London exported a massive 31% of all exports from Great Britain, and with 41% of this headed to the EU, the city exports almost as much to the bloc as all other cities in Britain combined. Nearly three-quarters of these exports are of services, with financial and insurance services making up a large share of exports from the city. If a trade deal with the EU that covers both services and goods is not reached, this will have a massive knock-on effect for the large, high-skilled service exports sector in the capital, as well as for the country as a whole.
Trade deals with other countries cannot replace a trade deal with the EU
The EU accounts for 43% of the exports of British cities (see figure 5). The second-largest destination for exports from nearly all cities in Britain is the US, at 19%, which underlines why Joe Biden’s recent refusal to do a trade deal if he wins the US election and a border is reintroduced on the island of Ireland is so important.
That said, trade with the US is still less than half of the amount of goods and services sold from cities to the EU. For most cities, trade with the US accounts for less than one-fifth of sales. At 24%, Coventry is more reliant on US custom than any other city or large town in Great Britain.
Any trade deal struck with China would also have a limited effect compared with a trade deal with the EU. Coventry is also the city with the highest share of exports to China, at 12%. It is one of only four cities with more than 10% of their exports heading to the country.
Trading more with the Commonwealth has also been proposed as an alternative to trade with the EU. There are two problems with this solution. First, the Commonwealth is not a trading bloc, meaning that the UK will need to agree 53 individual trade deals with the other Commonwealth members.
The second problem is that, even if this were easy, only a small share of cities’ exports head to Commonwealth countries. Derby exports the most to the Commonwealth, with 15% of its outward trade going to those 53 countries. The Commonwealth accounts for no more than 10% of any other city’s trade.
While failure to secure a good EU trade deal covering both goods and services would harm the economies of every city in Britain, those in northern England that the government has pledged to level up would be hardest hit.
So with the transition period ending soon, it is vital that the UK and EU agree a deal that benefits cities’ economies, and as a consequence the nation as a whole.
Tom Sells is a researcher at think tank Centre for Cities
Note – this article includes data for 62 cities in Great Britain; comparable data for Belfast was not available
