Road to Brexit: The Heartlands Where a Good Deal Matters Most

Britain may be in disarray, but one thing remains on track: at the stroke of midnight on March 29, 2019, the country is due to leave the European Union.

After the divisive Brexit vote was followed a year later by an election that produced no clear winner, the overarching question also hasn't changed, even if the political landscape has shifted. Will the departure bring the promise that Leavers believe or the pain that Remainers think is inevitable?

The answer lies in the economic realities away from the noise of party politics. The testing grounds for any Brexit agreement—as indicated by a Bloomberg analysis of some key industries—will be such places as the English Midlands near Birmingham, the North East around Sunderland, and the old British rust belt around Liverpool. Many of these areas voted to leave the EU. Their economies, however, are dependent on foreign corporations that set up shop there with an eye to the tariff-free movement of goods between Britain and the other member countries of the EU. These are the areas where a hard Brexit will hurt the most.

The interactive map below highlights some of the areas in which the health of the local economy will depend on how Britain negotiates Brexit—based on how those areas voted on Brexit and on manufacturing’s share of employment. Most are former areas of heavy industry focused on exports, typically with lower average incomes and higher levels of unemployment. The map also factors in the presence of more than 100 factories operated by large foreign manufacturers in key industries particularly reliant on EU trade or labor.

The Industries Britain Can’t Afford to Lose

Much depends on the results of the Brexit talks and how much of present trade conditions Britain’s negotiating team can preserve. But there is already corporate anxiety. The U.K. government last year stepped in to calm carmaker Nissan Motor Ltd. about the consequences of Brexit, assuring the company that it would seek tariff-free access to the single market. The Yokohama, Japan-based company opened a factory in northeast England in the mid-1980s as a back door into the European market. The facility in Sunderland is the largest car plant in Britain and last year produced more than half a million cars.

The companies in our analysis make everything from cars and airplane parts to potato chips and medicine. Collectively, they represent more than 80 billion pounds ($101 billion) in U.K. sales and support more than 200,000 jobs. Most are household names—Nestlé, Pfizer, and Hitachi, to name just a few—operating at least four U.K. factories, each, on average.

Where a Hard Brexit Would Hit Hardest

In addition to the Nissan plant, the area around Sunderland in the North East of England plays host to other multinationals, including Coca-Cola, General Electric, and Siemens, with the region as a whole sending over 60 percent of its exports to the rest of the EU.

Derbyshire, in the East Midlands, and the nearby city of Birmingham (population 1.1 million), are equally vulnerable. Bombardier makes trains here, Toyota and BMW assemble cars, and Mondelēz International produces Cadbury chocolate bars. In some parts of the Midlands, manufacturing represents almost 1 in 4 jobs.

Europe has been particularly key to the economic viability of north Wales and the adjoining rust belt of metropolitan Liverpool. Both sides of the Mersey have large export-oriented factories belonging to Ford, Unilever, and Tata Motors' Jaguar Land Rover division. Over two-thirds of Welsh exports go to the rest of the EU, more than any other U.K. region. Airbus SE manufactures the wings of almost all its civilian aircraft in Wales before transporting them to assembly lines in France, Germany, and even as far as the United States. Should the U.K. leave the single market without retaining some sort of access agreement, any resulting restrictions will clearly affect the manufacturing efficiencies of such a global supply chain.

Too Big to Fail

Few industries encapsulate what’s at risk in the Brexit negotiations more than British automotive production. In recent years, the country has returned as a net exporter of cars for the first time since the 1970s. Around 1.7 million vehicles were produced in the U.K. last year, a 17-year record. More than half of them were exported to the rest of Europe.

In addition to Nissan in Sunderland, Toyota Motor Corp. committed to its Derbyshire plant, though not to building future models there. French carmaker Peugeot said that workers at its Vauxhall unit, which it recently bought from General Motors, will be given a “chance” to prove their efficiency, while Ford said job security for its more than 10,000 employees will depend on whether the U.K. maintains tariff-free trade with the EU.

Now the eyes of executives, workers and their families will be on events unfolding in Brussels as U.K. and EU negotiators try to hammer out a deal. Only then will they learn whether the future holds pain or promise.