London’s Economy after Brexit: Impact and implications

This study was commissioned by the Greater London Authority (GLA) as a follow-up to Cambridge Econometrics’ (CE) 2018 ‘Preparing for Brexit’ study. It uses CE’s macro-sector model E3ME to model two scenarios: • Central: a scenario that projects the trajectory of the UK economy based on economic and demographic forecasts already published at the time of the Office for Budget Responsibility (OBR)’s March 2023 economic forecast. • Counterfactual: a scenario that estimates what would have happened had the UK not left the EU. To construct the Counterfactual scenario, we consider how variables such as the UK’s investment, trade, and the price of carbon under the emissions trading scheme (ETS) would have differed in the absence of Brexit. Our results present the difference between the two scenarios up to 2035, and can be interpreted as the change in economic outcomes in the London and UK economies for which Brexit is the principal contributor. We find that while London’s economy is more resilient to Brexit’s effects than the rest of the UK, Brexit has led to negative impacts in London and the UK in terms of gross value added (GVA) and employment. It has also accelerated the widening productivity gap between London and the rest of the UK. This report presents the methods, assumptions, and findings of this study.