Local authorities facing budget cuts and brain-drain as UK votes for Brexit

Councils across the country are facing financial uncertainty after the UK public yesterday voted to leave the European Union.

Local authorities face uncertainty as budgets are likely to face the chop – Photo credit: Flickr – Kevin Doncaster

With the implications of the result still sinking in, a primary concern among local government commentators was further austerity for a sector that is already facing severe budget cuts.

“We are almost certainly staring down the barrel of a recession, more austerity and retrenchment,” said Martin Ferguson, director of policy and research at Socitm.

In addition to the financial turmoil created by the result itself, a Brexit will mean UK regions no longer have access to European Regional Development Funds and European Structural investment Funds.

The UK received billions from ERDF funding between 2007 and 2013, with the North West brining in €755.5 million and Yorkshire and the Humber €583.6m.

The Local Government Association said: “Communities in England have been allocated £5.3bn of EU regeneration funding up to 2020. It is important for the government to guarantee it will protect this vital funding to avoid essential growth-boosting projects stalling and local economies across England being stifled.”

Diminishing digital

Carrie Bishop, co-director of FutureGov, said there were “major implications” for the regions that rely on EU funding.

“This will have ramifications for devolution, and on their ability to afford digital innovation as they have to prioritise other things with even scarcer resources,” she said. “We could end up with even more of a two-speed country where only those areas able to afford digital innovation can thrive.”

Ferguson echoed this sentiment, saying that although budget pressures could accelerate the pace of digitisation in efforts to save money in the short-term, the long-term effects would not be good.

“As services get further starved of investment, and digital skills become scarcer as we see a ‘brain drain’ to mainland Europe and elsewhere, we are likely to see a further diminution of the state and withdrawal from various service areas,” Ferguson said.

A further concern for those employed in digital transformation is a lack of collaboration with European leaders in the field.

“EU connections have been instrumental in driving much of the UK’s digital innovation,” said Bishop. “Countries like Estonia are leading the way and have shared their knowledge freely with the UK – who knows if this will still be the case in the future?”

Moreover, she said that the UK could have difficulty recruiting the best people to help improve government in the future, noting that around 20% of FutureGov’s staff were EU citizens.

For David Jones, a public services consultant based in Cardiff, one of the biggest concerns would be the distraction of dealing with a Brexit. “The sheer disruption of having all kinds of people involved in meetings and establishing strategies, instead of concentrating on day-to-day delivery will be insidious – you can’t plan or budget for it.”

Data protection must remain

A number of commentators urged organisations not to forget data protection regulations, saying that the UK was likely to have to sign up to the incoming EU General Data Protection Regulation to keep up with international competition.

“Compliance with the standards of EU data protection law will be a ‘red line’ requirement for the UK’s continuing access to the single market,” Stewart Room, head of PwC Legal’s data privacy and protection practice, said.

“Therefore, it is almost inevitable that the UK will pass legislation to give effect to the GDPR. Failure to do so will not only lock out the UK from the single market, but it will effectively prevent any form of business with the EU where personal data is involved.”

The Information Commissioner’s Office confirmed this, and said that it would be speaking to the government to present our view that reform of the UK law around data protection is still necessary.

Bad for business

There are also major concerns for the effect a Brexit will have on business.

Theo Blackwell, Camden Council’s cabinet member for finance, technology and growth, said he was concerned about the impression it would give to businesses, and the knock-on effects of a reduction in business rates generated by councils.

“Large businesses who head-quarter in the UK see London and Camden as a bridge to Europe, and we need to make sure they’re reassured,” he said. “If people start looking at moving to Berlin or Amsterdam it isn’t just bad for the UK economy – these companies pay business rates that pay for services not just in Camden but the rest of the country.”

Mark Mithcell, chief executive of Meridien Business Support, agreed that Brexit could dissuade companies from choosing to move to the UK.

“As a country we will become less relevant. In the years to come, I expect we will experience a significant lack of investment in major industries as other countries won’t want to trade with the UK,” he said. “The economic impact will be damaging as we have cut ourselves off from a valuable source of skilled labour and we may have cut ourselves off from the single market.”

Meanwhile, Julian David, chief executive of TechUK, which represents technology companies in the UK, said that although the vote opened up “many uncertainties about the future”, now was the time for action.

“There will be a long to-do list with many policy and regulatory issues requiring urgent action. Without the benefits of EU membership, the UK needs to be at its very best to succeed,” David said. “Tech companies will need to come together and speak with one voice to ensure their needs are understood and acted upon.”


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