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‘How should councils respond to Brexit’s economic shocks?’

Henry Overman
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With all British cities likely to see a fall in economic output as a result of Brexit, thoughts are turning to the policies needed to help local economies adjust to the challenges ahead.

Leaving the EU may bring opportunities, but has rightly raised fears that some places and industries will face major job losses. These may occur when large firms close, downsize or restructure in a single town or city; or when structural change has a big impact on communities because of the geographical concentration of affected industries.

The What Works Centre for Local Economic Growth has been working with local councils to develop appropriate policy responses to these shocks, looking at lessons from recent policy interventions aimed at dealing with major job losses. Our findings are summarised in our toolkit for policy-makers.

We looked at evidence on the effectiveness of support for workers through education and training, re-employment services, support for entrepreneurship, and counselling and psychological assistance. We also looked for evidence on sector-based responses to major job losses and area-specific initiatives. In particular, we focused on evaluations which identify impacts attributable to a specific policy intervention with some degree of certainty.

One of the big issues for policy-makers is whether support should be provided to workers before or after redundancy. The studies we found raised some doubts about the effectiveness of services provided to people pre-redundancy. In contrast, results were generally more positive for retraining post-displacement.

Another key policy question is whether localised, area-specific interventions are more effective than more traditional, non-placed-based approaches. We found only one study addressing this question, which suggested that area-specific approaches resulted in quite significant positive employment and earnings effects. However, costs for these area-based interventions are also high, and more evidence is needed to whether they are cost-effective.

Some studies also looked at age and gender differences. For the former there were some distinct differences, with younger workers benefiting more from retraining support than older workers. That’s perhaps not surprising, because younger workers will (we hope) have longer working lives ahead of them. But it still raises the question what to do about older workers.

Our toolkit discusses other issues such as whether vocation-orientated support courses do better than non-vocational, and whether the length of course matters, but unfortunately there is not enough evidence available to inform these kinds of policy design decisions.

Given the importance of supporting workers and communities affected by major job losses, a lot of questions remain unanswered. We’re working with local authorities to try and fill some of those gaps, and are running free workshops with local policy-makers to help them use evidence to better design local economic policy.

Professor Henry Overman, director, What Works Centre for Local Economic Growth

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