The Impact of Brexit Uncertainty on Councils: Three take-aways from NLGN’s latest Leadership Index Survey

Uncertainty is bad for the economy. Yet the events of recent days and weeks have revealed even greater lack of clarity for local government when it comes to Britain’s departure from the EU.

Our latest NLGN Leadership Index finds that Brexit uncertainty is taking a toll on economic confidence in local areas, as well as distracting councils from delivering key local services. Here are three key take-aways from the NLGN Leadership Index October 2019:

1. Councils are increasingly pessimistic about the impact of Brexit on their local economy.
   In March 2018, we asked council chiefs what kind of impact they expected Brexit to have on their local economy. 61.1 per cent respondents indicated they expected a negative or very negative impact and 11.7 per cent expected Brexit to have a positive or very positive impact. Almost two years on, we repeated this question to council chiefs in this quarter’s survey and the results reveal increased pessimism in local government with 70.7 per cent expecting a negative or very negative impact (an increase of 16 per cent), and only 5.4 per cent expecting a positive or very positive impact (a 54 per cent drop).

2. More than three quarters of respondents have had to divert resources from key public service priorities to prepare for Brexit.
   A majority of councils (79 per cent) have had to divert resources from key public service priorities to prepare for Brexit. Alarmingly, about three quarters of upper tier councils with social care responsibilities have had to divert resources. Furthermore, there is some regional variation: as many as 92 per cent from Yorkshire and the Humber indicated they had to divert resources whereas only half of councils in the North East indicated they had to do so.

   Across key services, those from upper-tier councils (including county councils) felt more confident than those from district councils. For example, overall under half of all councils said their health and wellbeing services (45 per cent) and adult social care services (44 per cent) were prepared for Brexit whereas around three-quarters of respondents from social care-providing councils felt their children’s services and adult social care were ready for Brexit.
   
   

3. Optimism in the local business environment has continued to decline and is now the lowest since the first Leadership Index survey in March 2018.
   Optimism in the local business environment has dropped from 58.9 to 55.5 (on a scale of 0-lowest to 100-highest) since the last quarter. This quarter’s confidence level is the lowest since the first Leadership Index survey in March 2018 – it is 5.8 per cent lower than the last quarter’s, and 16.7 per cent lower than the figure in Q1 2018-19. Confidence level across two other indicators: that ‘businesses in the area have sufficient opportunities to thrive’, and ‘that there are sufficient employment opportunities in the area’, have stagnated at a similar level to the previous quarter of about 63 on a scale of 0 to 100.

This quarter’s findings show that councils are bearing the consequences of prolonged Brexit uncertainty. Councils have already diverted significant resources to prepare for Brexit. Council chiefs told us that preparations have been intense through cross-authority collaboration and information sharing. Some have “trained officers to be able to assist other authorities where demand for services or workload may rise sharply” while others have engaged in “endless scenario planning” and “business resilience planning”. Many council chiefs have expressed frustration, with one saying “practical acts difficult to work in as type of exit not yet known”.

This quarter’s findings paint a picture of councils stepping up preparation for Brexit while feeling increasingly down-beat about its impact on their economies. Understandable, when these preparations have already eaten up funds that could have been spent on services like adult social care, children’s services and the local environment. These findings should be a signal to Government that councils urgently need more support and certainty in order to make reasonable practical plans needed to cushion any further negative impact on their communities.

NLGN’s Leadership Index is a quarterly survey sent to all chief executives, leaders and council mayors in the UK. It provides insight into the level of confidence on key issues affecting local government. A full report of the results from the October 2019 survey can be downloaded HERE.

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