The impact of Brexit is likely to be more pronounced in London, according to a London Councils briefing paper.
The high concentration of services jobs, an export-dependent market that relies on access to the EU market and the relatively large and skilled EU workforce mean London could bear the brunt of Brexageddon.
Talking to The London Economic, Wandsworth Borough Councillor Ian Lewer said: “It is clear from the recent economic turmoil that the effects of Brexit on London will be negative in the short term. There is significant risk of jobs losses, business relocation, a lack of inward investment and declining house prices.
“This potential economic slowdown will also impact negatively on the UK’s public finances with London contributing the largest share of tax revenue of any region.”
Here’s the gloomy breakdown:
Some 73,000 jobs are expected to be lost in the short-term, including 8,000 jobs for 16 – 24 year olds. Potential workforce restrictions mean an estimated three-quarters of the 850,000 EU citizens working in the UK would not meet the current visa requirements for non-EU workers, including 94 per cent of workers in the accommodation and food sector.
As for the capital’s student population, a likely reduction in EU research and innovation funding – which currently accounts for more than a fifth of the UK’s £8 billion total – would significantly impact university research activities. London also attracts a disproportionately high number of EU students – around 33,000 out of a total 360,000 students – which could result in a gap in applications.
Property prices are expected to fall in the short term, with forecasters predicting that across the UK average prices will drop by between 5 per cent to 18 per cent in the next few years. Predicted price falls in London range from 1.25 per cent to 10 per cent, with a current average price of over £550,000. Uncertainty may also impact the development pipeline for both residential and commercial property.
On the business front, Brexit is likely to have a negative short-term impact on business performance and growth in London, with increased uncertainty, constrained lending, and a widely predicted recession. HMT has predicted four quarters of negative growth for the UK, followed by reduced growth going forward. As more London businesses export their goods and services internationally compared to the rest of the UK, the impact of leaving the single market will be more pronounced. Foreign direct investment (FDI) is also expected to take a hit as half of the £1 trillion the UK receives in FDI derives from EU member states.
Despite a gloomy outlook in the short-term, there are reasons to be optimistic in the long run if Britain can position itself as the bridge into Europe for the rest of the world.
The Transatlantic Trade Deal (TTIP) between the EU and the United States looks like it may be blocked by protectionist EU members who have been given a clear path by the Brexit result. If Britain decided to stay within the EEA we could lift TTIP and agree it with the United States and have a transatlantic deal which would allow US companies to base themselves in the UK and gain access to the EEA with all of the associated benefits.
Councillor Lewer says many of the predictions noted above could be “mitigated” by remaining in the EEA, adding that “the opportunities offered by leaving the EU are potentially enormous for the world’s most interconnected global city.
“Access to the wider free trade agreements around the world could position the UK, with its existing service industry expertise, as the world’s leading financial centre alongside providing access to the rest of the world’s largest economies and fastest developing markets.”