London mayor Sadiq Khan will declare “Brexit isn’t working” as he unveils new research suggesting the UK economy is £140bn smaller than it would have been if Britain had remained inside the EU at a keynote speech at Mansion House on Thursday.
Independent analysis from Cambridge Econometrics, commissioned by City Hall, suggests the output of the national economy is six per cent smaller than it would have been if the UK had remained in the EU customs union and single market.
The consultancy’s estimate that overall British economic output was a £140bn lower than if Britain had remained inside the EU — £2.2tn compared to £2.34tn — was based on economic modelling of a “counterfactual UK” that had not voted to leave the bloc.
It also calculated the UK has 1.8mn fewer jobs — a drop of 4.8 per cent — than it would otherwise have had.
In his speech, Labour’s Khan will make the case for a more open debate about the downsides of leaving the EU and the potential merits of rejoining the single market.
“Rather than politicians dodging or ducking this issue, it’s incumbent on all of us to have an honest and mature discussion about the best way forward,” he will say. “Because the hardline version of Brexit we’ve ended up with is dragging our economy down and pushing up the cost of living.”
The intervention is awkward for Labour leader Sir Keir Starmer, who previously opposed Brexit but has now pledged to make it work as he seeks to woo former supporters who rejected the party over the issue.
Starmer has ruled out rejoining the single market or customs union but has insisted Britain can forge a “much better” deal for the UK while mirroring the EU on environmental, work and food standards.
The London mayor will say his demand for a “closer relationship with the EU” is broadly in line with the Labour leadership. But by calling for a pragmatic debate about the benefits of rejoining the customs union and single market he will go much further than Starmer.
London was one of the most Europhile parts of the country and 60 per cent of its inhabitants voted Remain in the 2016 referendum.
Cambridge Econometrics estimated that the city’s economy is £30bn smaller than it would have been if the UK had remained inside the EU, with 290,000 fewer jobs.
The consultancy also suggested the average Briton was nearly £2,000 worse off while the typical Londoner was £3,400 worse off because of the UK leaving the EU.
The Cambridge report claimed the economic damage would continue if the UK remained outside the single market, with real Gross Value Added (GVA) — a measure of UK economic output — about £311bn lower by 2035 (10.1 per cent) than it would otherwise have been.
It added that its analysis, which used historical data as the basis for predicting how a non-Brexit UK would have performed, is broadly in step with other modelling on Brexit effects by research organisations and think-tanks.
Last November, the National Institute of Economic and Social Research (Niesr) estimated the negative impact of Brexit at 5 per cent to 6 per cent of gross domestic product by 2035. The Cambridge report estimated the hit to GDP at 10 per cent.
The Cambridge analysis also found London’s economy will be relatively more resilient to the impact of Brexit than the rest of the UK. Output growth will be stronger than in the country as a whole while employment is predicted to increase at similar rates, implying that productivity growth would be stronger in the capital.
Sophie Hale, principal economist at the Resolution Foundation think-tank, said London’s superior economic performance was because of the capital’s concentration of services companies, which had proved more resilient to post-Brexit trade barriers.
Hale added: “This shows we need to do more to protect goods such as advanced manufacturing from the Brexit trade shock, and for more of our major cities to sell services to the rest of the world. This success can’t continue to be confined to London.”
The Office for Budget Responsibility, the government’s fiscal watchdog, issued a report last year suggesting Brexit would cut Britain’s long-term productivity by 4 per cent.
The OBR also estimated both exports and imports would be about 15 per cent lower in the long term compared to staying in the EU.
The Treasury said: “The UK has grown faster than Germany since leaving the EU, and the IMF has said our medium-term growth outlook is brighter than many of our neighbours on the continent, including France and Germany.”
