“Manchester has strong connections and in places dependence on its membership of the EU,” according to Sir Howard Bernstein, chief executive of Manchester City Council, writing in a 19-page report on the potential impacts of the UK leaving the European Union, due to be discussed at the council’s economy scrutiny committee meeting today.
Bernstein argues that vital access to markets, regeneration finance, research grants, overseas students, and business investment help drive Manchester’s growth and leaving the EU would place the city at risk of an economic slowdown.
Manchester’s position is shared by the Core Cities, 10 large regional cities of the UK working collectively, whose leaders agreed earlier this month to campaign to remain in the EU in the forthcoming referendum, set for 23 June. The cities are Birmingham, Bristol, Cardiff, Glasgow, Leeds, Liverpool, Manchester, Newcastle, Nottingham and Sheffield.
Manchester is likely to play a leading role in the Core Cities campaign and the report offers a first glimpse of the arguments that could feature.
During two pages of conclusions, the council chief executive writes:
“Although the detailed implications of an exit from the European Union will be dependent on a wide range of factors, and will depend on what reforms are delivered as part of the current renegotiation process, this paper shows that Manchester has strong connections and in places dependence on its membership of the EU.
“…Manchester, with its international gateway role, focus on new economy sectors, attractiveness to young and skilled European workers and assets such as the Airport and international research centres is at some risk. At the very least, an exit could result in slower economic growth of the city economy and the ability of the city to achieve its growth potential in the medium term would be less certain.”
Consultants Ekosgen and the New Economy, part of the Manchester Growth Company which advises the 10 Greater Manchester authorities on policy, were commissioned to carry out research which fed into Bernstein’s report. His argument is based on five key planks, summarised and reproduced in extracts below:
Foreign-owned companies could already be delaying investment decisions or investing elsewhere due to uncertainty over the outcome.
“Greater Manchester has a considerable number of foreign owned companies in a wide range of sectors, and many are likely to be affected by delays to investment and expansion plans. In some situations, where office and plants are in competition with other company locations elsewhere in Europe, there is a risk that uncertainties (and an exit in the longer term) could result in Manchester losing out to other countries. Manchester Airport and strong connectivity to other major cities gives Greater Manchester a significant advantage as a gateway to the EU, for both HQ and regionally significant employment centres…A number of major airlines that operate from Manchester Airport have indicated that they are strongly in favour of the UK remaining a member of the EU and have spoken about the importance of EU wide agreements that have led to a big increase in routes between EU destinations.”
Access to markets
Bernstein cites the central principle of free trade with a single market of 500 million customers; as well as emerging plans for a single digital market with shared policies and legislation for media and e-commerce; and the threat posed by an exit to negotiations for EU-USA and EU-Japan free trade agreements.
The impact to the tourism sector, which provides 8% of all Greater Manchester jobs and was worth £7bn in 2013, is also described with a “risk that EU exit would marginalise the UK”.
Bernstein added: “Disruption in the event of an exit is expected to be most significant for financial services (due to high levels of regulation which could serve as a barrier to trade and would be outside the UK’s control) and those sectors with high export tariffs (above 4%) such as cars, chemicals and food which account for approximately 35% of the UK’s exports to the EU.”
Labour movement and availability
“Changes to migration rules would be expected to have an impact on the flow of overseas nationals into Manchester. In the context of strong economic growth forecasts and an ageing population, restrictions on labour movement could impact on the ability to deliver growth ambitions both in respect of the total workforce required and demand for skilled labour.”
“…Any changes to the entitlement of EU nationals to study at UK institutions would impact on the number of students attracted and levels of associated expenditure. The tuition fees that EU nationals could be charged could however increase in the event of an exit to equal those for other international students.”
Access to funding
“The European Structural & Investment Funds are the main funding instrument used to implement EU regional and cohesion policy. Between 2007 and 2013 over £150 million was received and during the current ESIF for 2014 – 2020 Greater Manchester has an allocation of £356m and will also attract significant match funding.
“The European Regional Development Fund and the European Social Fund provide funding for “many important projects including large scale skills development and business support programmes as well as the development of new facilities and infrastructure including the National Graphene Institute (£23m), NOMA (£6.9m), The Sharp Project (£7m), and the Second City Crossing (£10.8m). In addition to these grant funded elements of these programmes, Manchester has been a leader in the use of ERDF loan funds in the region [such as the Evergreen Fund]. These funds make repayable loan investments and recycle the funds to support more projects than would be possible with grants. Notable investments in the city include [Manchester Science Partnerships’] Citylabs on the [Oxford Road] Corridor and the XYZ Building [by Allied London] in Spinningfields. It is important to note that currently ERDF represents the only long term funding stream that is available to the Council to support its economic growth objectives.”
On research funding, the report highlights “contributions to the Cancer Research UK Manchester Institute and participation in both the Graphene Flagship and the Human Brain Flagship. With budgets of €1bn each, these Flagships are the largest R&D and innovation investment ever made in the EU and the University of Manchester is a key partner in both projects.”
The report also addresses problems with EU membership. Bernstein and his researchers point out that more could be done to support clusters of cities and on developing policies around the urban agenda, citing lack of recognition for the Transport for the North initiative to link Northern cities, in which Manchester is a key stakeholder.
“Burdensome and costly red tape, particularly for businesses and in areas of employment and procurement processes, is one of the biggest criticisms of EU policy and legislation,” Bernstein adds.
Bernstein also makes several recommendations for reforming the EU in areas of policy and process that could help the city.
“Development of a clearer medium to long term strategy to support the global competitiveness of Europe and its member states in the context of the burgeoning economies of Asia in particular,
“Clearer support at the EU level for initiatives developed by clusters of cities, such as those in the North of England, to develop critical economic mass and strengthen regional economies through enhancements to connectivity and investment in key growth sectors,
“Further work to reduce unnecessary red tape at the EU level and to simplify procurement and State Aid rules in ways which speed up internal processes and better support business and growth.”