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New report reveals UK economy is almost £140billion smaller because of Brexit

Created on
11 January 2024

Mayor highlights Brexit damage to London economy

  • London’s economy alone has shrunk by more than £30billion, Mayor reveals at prestigious Mansion House dinner
  • Independent report by Cambridge Econometrics, commissioned by City Hall, shows London has 290,000 fewer jobs than if Brexit had not taken place, with half the total two million job losses nationwide coming in the financial services and construction sectors
  • Mayor of London identifies Brexit as ‘key contributor’ to the current cost-of-living crisis – highlighting evidence that it is fuelling food price increases
  • Sadiq calls on the Government to build a closer relationship with the EU

 

The Mayor of London, Sadiq Khan, will use a speech at Mansion House in the City of London tonight to reveal that the cost of Brexit to the UK’s economy is £140billion, according to new independent analysis.

 

The new report, by Cambridge Econometrics commissioned by City Hall (1), also shows that London’s economy has shrunk by more than £30billion.

 

The average Briton was nearly £2,000 worse off in 2023, while the average Londoner was nearly £3,400 worse off last year as a result of Brexit, the report reveals.* It also calculates that there are nearly two million fewer jobs overall in the UK due to Brexit – with almost 300,000 fewer jobs in the capital alone. 

 

The Mayor will tell the prestigious London Government Dinner that the UK “urgently needs to build a closer relationship with the EU” to help arrest the decline.

 

According to the new research, the economic damage is only going to get worse – with more than £300bn set to be wiped off the value of the UK’s economy by 2035 if no action is taken, and more than £60 billion wiped off the value of London’s economy alone. 

 

In the keynote address to London’s political and business leaders this evening, the Mayor is expected to say:

 

“Rather than dodging and ducking this issue, it’s incumbent on all of us to have an honest and mature discussion about the best way forward.  It’s now obvious that Brexit isn’t working. The hard-line version of Brexit we’ve ended up with is dragging our economy down and pushing up the cost of living.  It’s making food more expensive, adding to the acute pressures on households and having an ongoing detrimental impact on industries that are crucial to our success – such as hospitality, construction and financial services. (2)

 

“I’d rather not be talking about Brexit again. But part of being the Mayor of London is about standing up for our city. We’ve got to be frank – Brexit is simply not a peripheral concern that we can leave in the past – it’s a key contributor to the cost-of-living crisis right now and it’s resulting in lost opportunities, lost business and lost income at a time when people and companies can least afford it.    

 

“The cost of Brexit crisis can only be solved if we take a mature approach and if we are open to improving our trading arrangements with our European neighbours. I agree with the Shadow Foreign Secretary, who has said we urgently need to build a closer relationship with the EU. Because a new settlement would not only turbocharge our economy and help to raise living standards, but help to unlock the growth and prosperity we need.” 

 

The Mayor will also use his speech to say the Government needs to start mitigating the impact of Brexit by tackling London’s labour shortage, taking an approach to migration that is “informed by evidence, not prejudice”.  He is expected to say:

 

“For too long, we’ve seen a race to the bottom in rhetoric and policy, with politicians blaming “the other” for our problems – playing on people’s fears, rather than addressing them.  This has resulted in significant damage to our economy, society and community cohesion. It’s time for politicians to be straight with the public:  immigration isn’t part of the problem, it’s part of the solution.

 

“I’m certainly not in favour of open borders or uncontrolled immigration.  But with severe worker shortages, we must be honest about what’s best for our city.  We need both British and foreign-born workers to support our public services, power our companies and drive our capital and country forward.  

 

“Immigration is a difficult, contentious issue.  But the economic benefits – not to mention the social and cultural advantages – mean we have a duty to craft an approach that’s guided by facts, not fearmongering.” 

 

The Mayor will also talk about the importance of defending London’s values. He’s expected to say:

 

“We can’t let small-minded politics threaten our precious values and what makes London so special.  I’m talking about our values of openness and co-operation. Of internationalism and global engagement. Of respect for one another. Of seeing diversity as a strength, not a weakness. And of fighting for equality for all – regardless of race, background, religion, sexuality or disability. 

 

“These are tenets that have enabled London to thrive for hundreds of years: economically, culturally and socially. To scale new heights and to become the incredible city it is today – the greatest in the world. 

 

“We should be worried about the threat to the very values that underpin our success and our ability to withstand adversity. More and more, we see the politics of “us” versus “them” seeping into our national discourse, and into the politics of the US and countries across Europe.  We cannot allow it to take hold here in London.  So, for as long as I’m Mayor, I promise to work to protect London as a city that’s inclusive and outward-looking. A city that’s open to new opportunities to increase trade, investment and access to talent. And a city where we keep the promise of opportunity alive for the next generation – so that we can continue building better, fairer London for everyone.” 


Mayor highlights Brexit damage to London economy

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Notes to editors

  1. Cambridge Econometrics Report: https://www.camecon.com/what/our-work/londons-economy-after-brexit-impact-and-implications

 

*These figures have been calculated by dividing the total GVA loss by the total number of Londoners / UK residents.

 

Shyamoli Patel, Principal Economist at Cambridge Econometrics, said: “Our study reveals that London’s economy would have grown faster if Brexit hadn’t taken place. Looking ahead, we project that Brexit will continue to have an impact on the UK and London economies in the medium term.” 

 

  1. The Impact of Brexit on London's Economy - 2023  https://www.london.gov.uk/business-and-economy-publications/impact-brexit-londons-economy-2023-report 

     

 

  • In 2018, the Mayor commissioned leading economic analysts Cambridge Econometrics to study the potential impact of different Brexit scenarios on London and the whole of the UK.  Cambridge Econometrics has now revisited that analysis, with support from the Greater London Authority’s Economics team, to project the economic impacts of the UK’s departure from the Customs Union and Single Market, in particular the impact of the UK-EU Trade and Cooperation Agreement.  The report shows that:

·        The UK has 1.8m fewer jobs now that it would have been had Brexit not happened – a drop of 4.8 per cent. There are approximately 290,000 fewer jobs in London in 2023 compared to a scenario in which Brexit did not occur.

·        There are 523,000 fewer jobs in construction nationwide, with 81,000 less in London under this scenario.

·        There are 388,000 fewer jobs in financial services nationwide, with 92,000 less in London under this scenario.

·        The average Briton is nearly £2,000 worse off, while the average Londoner is nearly £3,400 worse off as a result of Brexit. 

·        UK real Gross Value Added (GVA)- a measure of the size of the economy- is approximately £140bn less in 2023 than it would have been had the UK opted to remain in the Customs Union and Single Market - a drop of six per cent. The capital’s real GVA is more than £30bn less in 2023 under this scenario.

·        This economic damage is set to increase should the UK retain its current relationship with Europe. For example, by 2035, the UK’s real GVA would be about £311 billion lower (10.1 per cent) than had it not left the EU. London’s real GVA would be about £63bn lower.

 

  • Brexit has also made the cost-of-living crisis more severe in the UK. City Hall analysis shows that 30% of the increase in food prices between December 2019 and March 2023 could be attributed to the effects of Brexit, and other research from the LSE confirms this by showing that Brexit added an average of £210 to household food bills over the two years to the end of 2021, costing UK consumers a total of £5.8 billion.

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