London Mayor Sadiq Khan calls on the UK government to “urgently build a closer relationship with the EU” after a new report reveals how much the UK economy is losing after leaving the EU.
Britain’s departure from the European Union has cost its economy some £140 billion (€162.87 billion) so far, with an economic output of 6% less than if the UK had remained in the EU, according to a report by Cambridge Econometrics.
The report was commissioned for City Hall by London’s mayor, Sadiq Khan, a member of the opposition Labour Party which voted against Brexit in 2016.
In a keynote address to London’s political and business leaders on Thursday evening, Khan called on the UK government to “urgently build a closer relationship with the EU” to stem the decline.
“It’s now obvious that Brexit isn’t working,” Khan told the Mansion House audience on Thursday evening. “The hard-line version of Brexit we’ve ended up with is dragging our economy down and pushing up the cost of living.”
What is the cost of Brexit for Brits?
London’s economy is shorter by a little over £30 billion (€35 billion) due to the divorce from the EU, the report said.
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 City Hall website said, citing the study.
City Hall is the site of government for London’s mayor and elected assembly.
The report’s calculations also show there are now 1.8 million fewer jobs overall in the UK as a result of Brexit – with almost 300,000 fewer jobs in the capital alone.
The report’s figures are based on calculations of gross value added (GVA), the increase in the value of the economy due to the production of goods and services.
To make their projections, economists at Cambridge Econometrics used data from the Office for Budget Responsibility (OBR)’s March 2023 economic forecast.
The OBR has since released an updated Economic and fiscal outlook (EFO) for the five years to 2028-29 in November 2023.
What is on the horizon for the UK without stronger ties with the EU?
The study states that the overall cost of leaving the EU is going to swell to £311 billion (€361.8 billion) by 2035, as UK output, investment, exports, imports, employment and productivity are all expected to be lower than if the UK had remained in the EU.
The output is expected to be 10.1% lower in the UK and 7.5% lower in London by 2035, with nearly three million fewer jobs post-Brexit by 2035, around 500,000 of which would have been in the capital.
Investment in the UK by 2035 is projected to be more than 32% lower than it otherwise would have been, leaving its mark on London’s economy too. This is due to new trade barriers reducing EU businesses’ desire and ability to trade with the UK, while import costs are increasing.
Brexit is expected to shave off 5% of the export and 16% of the import volumes by 2035, leading to net trade becoming positive eventually.
London’s productivity is projected to remain similar to what it would have been had the UK remained in the EU, but the capital’s output and employment are still going to struggle because of Brexit’s long-lasting effects, the study believes.
Consequently, the productivity gap between London and the rest of the UK is forecast to widen further.
The study from Cambridge Econometrics also refers to another report by the National Institute of Economic and Social Research (NIESR) on the impact of Brexit. That report estimates it will take 15 years for the trade and productivity impacts attributable to Brexit to fully materialise in the UK economy.