Brexit Erased £140 Billion From UK Economy, London Mayor Says

Irina Anghel, Bloomberg News

, Source: Cambridge Econometrics

(Bloomberg) -- London Mayor Sadiq Khan on Thursday will blame Brexit for costing the UK economy £140 billion ($178 billion), calling on the government to “urgently” rebuild relations with the European Union to stem the decline.

Britain’s EU divorce has also meant there are 2 million fewer jobs nationwide than there otherwise would have been, including 290,000 lost positions in London, according to research by Cambridge Econometrics commissioned by City Hall that the Labour Party’s Khan will reference in a speech at Mansion House. Half of the total job losses are in financial services and construction.

“The hard-line version of Brexit we’ve ended up with is dragging our economy down and pushing up the cost of living,” Khan will say, according to excerpts released by his office. “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 neighbors.”

While Khan’s excoriation of Brexit is in tune with the UK’s mainly Remain-voting capital city, it’s at odds with the more cautious line Labour leader Keir Starmer is trying to tread ahead of a general election expected in the second half of the year. A Remainer himself, Starmer is nevertheless seeking to win back the votes of Brexit-supporting former Labour voters in the north of England and the Midlands who switched to the Conservatives in the 2019 election. Starmer said in September there is “no case for rejoining the EU” or its single market and customs union.

Starmer has also said he wants a closer relationship with the EU, but he tends to avoid referring to the negative effects of Brexit, which was backed by 52% of voters in the 2016 referendum that triggered Britain’s exit from the bloc.

Britain’s economic output would have hit £2.34 trillion in 2023 if the nation had remained inside the EU, 6% more than the £2.2 trillion it logged, according to Cambridge Econometrics. It predicted the impact will worsen, shaving £311 billion off projected output in 2035 compared to a non-Brexit scenario, equivalent to a 10.1% hit. The analysis uses historical data to predict how the economy of a non-Brexit “counterfactual UK” would have performed.

The report also suggests London’s economy was £30 billion smaller than it would have been without Brexit. The average Londoner was £3,400 worse off in 2023 due to the vote, compared to the £2,000 estimate for the average Briton.

Khan will use the report to make the case for addressing London’s post-Brexit labor shortages with an approach to migration that is “informed by evidence, not prejudice,” as well as pushing for new arrangements with the EU.

“We urgently need to build a closer relationship with the EU,” Khan will say. “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.”

Prime Minister Rishi Sunak’s spokesman, Max Blain, dismissed the findings, telling reporters at a regular briefing Thursday the IMF’s forecast for UK economic growth is brighter than for many of its peers. “The UK has grown faster than Italy and Germany since the Brexit referendum in 2016, and faster than Germany since leaving the EU in 2020,” he said.

--With assistance from Emily Ashton and Lucy White.

(Updates with comment from Sunak’s spokesman in final paragraph.)