To illustrate a range of consequences of the UK’s future relationship with the European Union (EU) and to prepare London for Brexit, an Economic Committee meeting was held at the City Hall on 10th July. Earlier this year, the Mayor published findings from research he had commissioned to develop scenarios to model possible outcomes for the UK and London of the UK leaving the EU Customs Union and Single Market.
The research was carried out in a short time frame of 3 months, undertaken by Cambridge Econometric. Its report titled ‘Preparing for Brexit’ modelled five scenarios – (i) A ‘close to status quo’ scenario where the UK remains part of both the single market and customs union; (ii) a scenario where the UK remains part of the single market, but not the customs union; (iii) a scenario where the UK remains a part of the customs union, but not the single market, (iv) a hard Brexit scenario in which trade between the UK and the EU falls under World Trade Organisation rules with a two-year transition period from March 2019; and (v) as for scenario 4, but without a two-year transition period.
The panel of experts present at the meeting included Ben Gardiner (Director, Cambridge Econometrics), Dr Graham Gudgin (Centre for Business Research, Judge Business School University of Cambridge), Roger Bootle (Chairman, Capital Economics) and the Rt. Hon. Lord Andrew Adonis. In the panel discussion, it was noted, in line with the research, that London is more resilient than the rest of the UK and is likely to recover more quickly, widening the imbalance between London and other regions. In London, Construction and Hospitality sectors, which tend to require less skilled labour and employ a larger proportion of EU migrants than other key sectors, were expected to see larger impacts on employment than the rest of the country. Financial & professional services, Science & Technology, Creative & Construction are among the hardest-hit sectors by Brexit. The results also show that Brexit will not only reduce the size of the UK economy (compared to what may have happened if the UK remained in the single market and customs union), but also put it on a slower long-term growth trajectory (the economy is still expected to grow, but at a slower rate than if Brexit did not occur).
Lord Adonis said, “London has a global outreach and anything that reduces London’s international competitiveness is detrimental to London’s economy”. However, Mr Roger Bootle raised a conceptual issue: “We need to define what we mean by London’s economy. It cannot be seen in isolation. Should we be thinking about maximising the size of the economy or catering to the interests of current Londoners? We cannot bring millions of people into the UK from the rest of the world and not expect consequences.” The panel agreed that the government has an unclear stand on immigration policy and that post-referendum, the two years could have been optimised for planning Brexit. The panel of experts largely agreed that a no-deal Brexit is a highly unlikely scenario.
