- Independent economic analysis shows that Brexit could lead to a lost decade of lower employment and economic growth
- Worst-case no-deal Brexit scenario could mean 87,000 fewer jobs in London alone by 2030
- £50bn UK-wide investment could be lost London’s economy to suffer less from Brexit than the rest of the UK – widening UK inequality
- New independent assessments of the potential impact of Brexit have revealed the extent of the possible economic risks – and human cost – at stake in the EU withdrawal negotiations.
According to expert independent economic analysis commissioned by the Mayor of London, Sadiq Khan, a no deal hard Brexit could lead to a lost decade – or even longer – of significantly lower growth, with the country potentially having 500,000 fewer jobs in the worst-case scenario and nearly £50bn less investment by 2030 than would otherwise have been the case.
In London alone, there could be as many as 87,000 fewer jobs and the capital’s economic output could be two per cent lower by 2030 than predicted under the status quo.
The findings are in an analysis of the potential impact of five different Brexit scenarios on London and the whole of the UK, commissioned by the Mayor last year from leading economic analysts Cambridge Econometrics. The document also looks at the impact each Brexit scenario could have on nine key sectors of the economy.
The independent research shows that every Brexit outcome analysed would be bad for the British economy, but that the harder the Brexit, the more severe the economic damage could be.
The analysis also shows that London’s economy would suffer significantly less from Brexit than the rest of the UK. For example, economic output across the rest of the UK could be on average between 3 per cent and 3.3 per cent lower by 2030 than it would if Britain were to remain within the Single Market and Customs Union compared with between 1.9 per cent and 2.1 per cent down in London. This would widen geographic inequalities across the UK.
Sadiq announced last month that that he had commissioned the independent analysis from Cambridge Econometrics, just days after Brexit secretary David Davis admitted that the Government had not produced detailed economic impact assessments as previously claimed.
If the UK leaves the European Union in March 2019 with no deal on the single market, customs union or transition arrangements – which remains a real possibility given the short amount of time left to secure a deal and the Government’s mishandling of the negotiations to date – there could be 482,000 fewer jobs across the entire UK, together with 15 per cent – or £46.8bn – less investment than with a continuation of the status quo. The UK’s economic output (measured by Gross Value Added) could fall by 3 per cent by 2030 – the equivalent of £54.5bn.
The worst affected key sector in a no-deal hard Brexit scenario would be financial and professional services, which could have up to 119,000 fewer jobs nationally than would otherwise be the case. There could be 92,000 fewer jobs in science and technology, 43,000 fewer jobs in construction and 27,000 fewer jobs across the UK’s creative sector.
Even much softer Brexit scenarios, such as the UK remaining in the Single Market, but leaving the Customs Union after a transition period – the so-called ‘Norway’ option – could result in 176,000 fewer jobs than there otherwise would have been UK-wide.
In this scenario, there could also be a loss of £18.6bn of economic output and £20bn in investment. There would be 40,000 fewer jobs nationally in financial and professional services, 36,000 in science and technology, 18,000 fewer jobs in construction and 14,000 fewer jobs across the UK’s creative and cultural sectors, than there otherwise could have been. In total, there would be 31,000 fewer jobs in London, compared to the 87,000 jobs under threat by a no-deal hard Brexit scenario.
London’s professional and financial services would be the worst hit by a no-deal hard Brexit, with 29,000 fewer jobs by 2030 than if we remained in the Single Market and Customs Union. There would be 11,000 fewer jobs in science and technology, 5,000 fewer jobs in construction and 6,000 fewer jobs across London’s creative sector.
The Mayor warned that time is fast running out on the negotiations, as a final deal including the full details of a transitional deal and detailed agreement on the outline of a future trade relationship must be agreed between the UK Government and the EU 27 by October this year- just 10 months from now – in order to receive ratification from all EU members.
Sadiq reiterated his call for the Government to change course in the negotiations. He wants Ministers to abandon their hard Brexit approach and instead to push for continued British membership of the single market and customs union.
The Mayor of London, Sadiq Khan, said:
“This independent analysis reveals the potential economic risks – and human costs – at stake in the negotiations. It should help guide the government to the best outcome for London and the UK.
“If the Government continue to mishandle the negotiations we could be heading for a lost decade of lower growth and lower employment.
“The analysis concludes that the harder the Brexit we end up with, the bigger the potential impact on jobs, growth and living standards.
“Ministers are fast running out of time to turn the negotiations around. A “no deal” hard Brexit is still a very real risk – the worst possible scenario.
“I’ve released these impact assessments because the British people and our businesses have a right to know the likely impact of the various options the government are considering on their lives and personal finances. This new analysis shows why the Government should now change its approach and negotiate a deal that enables us to remain in both the single market and the customs union.
“It’s astonishing that the Government has failed to do any proper impact assessments on what Brexit could mean for our economy. Their complete lack of preparation is irresponsible leading to fears that they are putting party politics ahead of the national interest.”
Both the Mayor and Cambridge Econometrics are clear that this analysis is not a precise forecast of what will happen. There are a large number of factors that could impact on these scenarios, not least the details of any final deal with the EU or trade deals struck with any countries. The analysis does however highlight the scale of the comparative risks associated with each scenario and potential outcome from the negotiations.
Ben Gardiner, Director, Cambridge Econometrics, said: “This is the first time that the various impacts of Brexit – trade , investment and migration – have been comprehensively assessed across a number of key indicators and sectors at sub-national level. Our analysis is particularly valuable to local leaders because it indicates the potential impact on employment and output of Brexit under a range of scenarios, which is necessary given the uncertainty surrounding the final outcome of negotiations. Rigorous analysis and robust evidence such as this could also be usefully applied to other parts of the UK helping political and business leaders plan for the future.”
Jasmine Whitbread, chief executive of business group, London First, said: “The economy is stuck between a rock and a hard Brexit. Leaving the EU will come at a cost and, with many businesses about to make decisions about where they will invest and grow, it’s time the government stopped its ministerial reshuffling and internal politicking and instead set out a coherent plan for continued market access and tariff free trade with Europe.”
Catherine McGuinness, Policy Chairman at the City of London Corporation, said: “If these figures prove to be correct then this paints a worrying picture for the capital.
“It underlines the importance of getting a good deal in the Brexit negotiations. One that allows London’s financial and professional services the maximum two-way market access with the EU Member States that they need to grow and create jobs.
“We also need transition agreed as soon as possible to get us smoothly through Brexit, and more clarity over our future immigration system.”
Cllr Peter John OBE, London Councils’ Deputy Chair and Executive Member for Brexit, said: “These figures reveal the stark consequences of a hard Brexit scenario and its potential impact on ordinary Londoners. It is crucial we get a deal that ensures continued investment in London and devolved leadership to improve skills, help our business sectors grow and serve our communities, so that London continues to be place of opportunity that competes globally.”
To access the report by Cambridge Econometrics, visit www.london.gov.uk/brexit-analysis