University of Warwick working paper: Did Austerity Cause Brexit?

The EU referendum could have resulted in a Remain victory had it not been for a range of austerity-induced welfare reforms.

This is according to research by Thiemo Fetzer, from the Centre for Competitive Advantage in the Global Economy at the University of Warwick.

The paper argues that austerity induced welfare reforms brought about by the Conservative-led coalition government from late 2010 onwards are key to understanding Brexit.

This contributed to the growing support for the UKIP party in the wake of the EU referendum and developed broader anti-establishment preferences – strongly associated with popular support for Leave.

Key points include:

  • Aggregate real government spending on welfare and social protection decreased by around 16% per capita since 2010.
  • The Welfare Reform Act 2012 cost working age Britons from £914 in Blackpool to just above £177 in the City of London.
  • In districts that received the average austerity shock, UKIP vote shares were on average 3.6 percentage points higher in the 2014 European elections and 11.6 percentage points higher in the most recent local elections prior to the referendum.
  • From 2010 onwards, the growth in benefit incomes came to a halt as austerity started to take effect. This lies at the heart of the shift in public support towards UKIP.

Read the paper in full (pdf), or read the blog on LSE.