Westminster must “raise its game” on Brexit and protect Wales’ interests, peers have warned.
The House of Lords’ EU committee warned of risks to Welsh manufacturing and agriculture in a report on devolution and Brexit.
Welsh ministers called on the UK government to work with them to head off the dangers.
The report, published today, said the loss of EU funds could damage Welsh agriculture. It also said manufacturing in Wales could be severely affected if a comprehensive trade deal is not agreed.
Peers pointed out that the Welsh economy depends heavily on exports to the EU. Wales operates a £2.25bn trade surplus with the bloc, compared to a £2.3bn trade deficit with the rest of the world.
There is “acute concern” that the poorest regions of Wales would lose money if EU funding is replaced by the Barnett formula – which determines UK central government funding for the four nations by population – the report said.
Peers said Brexit should prompt government to finally “bite the bullet and replace the Barnett Formula” with a needs-based calculation.
The report also said control over environmental protection and farming powers currently held by Brussels should be returned to Cardiff rather than Westminster.
The UK government says moving the powers back to Westminster as part of the Repeal Bill will be temporary, however the Scottish and Welsh governments have described the bill as a “naked power grab”.
First Minister Carwyn Jones welcomed the report, saying Theresa May’s administration “cannot simply continue to put its head in the sand”.
“As the report notes, we have repeatedly tried to engage with the UK government and have put forward constructive proposals about how we can deliver a Brexit which honours the result of the referendum, safeguards the economy and respects devolution,” Jones said.
“I once again urge them to give serious consideration to our policy paper on Brexit and Devolution, which offers a workable blueprint for a major constitutional renewal of the UK.”
A UK government spokesman said the Repeal Bill “will not take away any decision making powers from the devolved administrations immediately after exit.”
He said: “Instead, to protect the UK internal market, some decision making powers being transferred into UK law will be held temporarily to allow intensive discussion and consultation with the devolved administrations.
“As the Secretary of State for Exiting the European Union has made clear, it is our expectation that the outcome of this process will provide a significant increase in the decision-making power of each devolved administration and we are committed to positive and productive engagement.”