Wales and Europe: The Economic Case for a New Referendum


I have always believed that leaving the European Union would have massive implications for the Welsh economy. However, like a good democrat I had to accept that Wales, like the rest of the UK voted to leave.

In the meantime, I have followed the withdrawal negotiations conducted by the UK Government with trepidation. Theresa May’s negotiating stance is determined by what she can get through her party rather than the interests of Wales and the Welsh economy. Her latest position-the Chequers deal-seems to be such a poor compromise that it is rejected by both pro-Europeans and Brexiteers. It is also likely to be rejected by the European Commission. We are therefore left with the prospect of a no-deal option which would be disastrous for us.

The implications of a no-deal option are now being laid bare for all to see. The first batch of technical papers issued by the UK government predicated a nightmare scenario of increased red tape, patients being denied access to medicines, and holiday makers being hit with hikes in bank charges. The implications for Northern Ireland are so bad that the Brexit Minister refused to say what the consequences of a no deal were! No doubt further papers will be released explaining the need for customs posts, the introduction of trade tariffs and the full implications of non-preferential WTO terms.

Even without these latest revelations the implications of leaving the EU for Wales were bad enough. The Treasury has only guaranteed access to EU funds until the end of the current round, with no guarantees beyond that date. Welsh researchers are already finding it difficult to secure partners for accessing Horizon 2020 research funds.
What we need to remember however is that even if we were to receive the full shortfall following the loss of CAP and Structural Funds, the lack of access to the single market poses an even more significant threat to the health of the Welsh economy. Access to the single market and the attempt to standardise conditions of access across the member states has provided Welsh businesses and companies which employ a significant number of people in Wales with opportunities to export without massive distortions and barriers to competition.

Being outside the single market means that Wales and its exporters are denied full access to our most important trading block and we will be disadvantaged by not being able to influence the rules by which we trade.

Leave campaigners deliberately confused voters with the idea that a country could have a free trade agreement which would give all the advantages of access to the single market but without the need for the free movement of people. But the free movement of goods and services cannot be secured without the free movement of people and acceptance of the other rules of the club. The European country with the closest relations with Europe outside the Union is Norway. The price it pays is making a financial contribution to the EU and being bound by the rules without any direct voice in shaping those regulations forming part of the single market.

The latest export figures show that 37% of Welsh exports by value (£1.124b) went to the EU. This is significantly higher than exports to other parts of the world, with 23% going to the USA and Canada and 15% to Asia. For Wales’ food and drink sector the EU is a vitally important market with 90% of our exports valued at £274m going to EU countries (2014 figures Business Wales).

Welsh GDP already low in proportion to the EU average is also likely to be adversely affected by the loss of EU membership. East Wales is at 93.7% and West Wales and the Valleys at 67.4%. This compares say to the Basque country at 116.1% and Catalunia at 110.7%. The loss of export markets will clearly affect Wales’ performance in terms of competitiveness and productivity leading to an impact on wage levels and unemployment. Multi-national companies such as Airbus, Ford, Toyota and others are likely at the very least to delay investment decisions and at worst transfer future investments to the European mainland. New inward investment opportunities are likely to be lost as companies will no longer see Wales as a platform for exporting to other EU countries.

Since I no longer have confidence in Theresa May’s ability to deliver a ‘good Brexit’ for Wales because of the massive divisions in her own party and given that the likelihood of a no-deal scenario is more likely by the day, I have come to the conclusion that we should be demanding a fresh referendum. It should be a binary choice, either to back a deal struck by Theresa May (or no deal if that happens) or to stay in the EU. The people of Wales stand a better chance of making an informed choice this time round, given that the full implications of Brexit have been laid bare.