Brexit will cost the London economy up to £9.5 billion a year – with the city’s service sectors bearing the brunt of the downturn, according to stark new research published by Mayor of London Sadiq Khan.
The mayor said UK businesses in the services sectors now face major barriers to doing business in the European Single Market and have to comply with varying rules across member states, together with additional red tape.
He said services industries — which include the financial, professional services, law, creative, technology and hospitality sectors — contribute 80% of the UK’s economy.
London accounts for 40% of the UK’s exports in services.
The mayor published an analysis of the UK Government’s Brexit trade deal from a London perspective by the Centre for Economics and Business Research (CEBR).
The analysis sets out the initial effects on London’s economy of the reduction in trade with the EU as a result of the Brexit agreement and shows a potential annual loss of £9.5 billion of Gross Domestic Product (GDP).
London’s financial and professional services sector alone is set to account for more than £2 billion in lost GDP per year.
The mayor is particularly concerned about the UK Government’s failure to secure a wider raft of agreements on regulatory equivalence, which would allow UK financial sector firms to continue providing specific products and services to clients in the EU.
As a result, the UK financial sector currently benefits from fewer equivalence decisions than its counterparts in the USA, Japan and other major trading centres.
Khan said: “London is a world leader in finance, law, professional services, the creative industries and technology.
“However, whichever way you slice it, the Government’s Brexit trade deal was the equivalent of a ‘no deal’ Brexit for financial and professional services, and our businesses now face a costly red tape mountain caused by the UK having to trade with the EU as a ‘third country’.
“For the good of London and the UK’s economy, the Government should have been focussed on getting a deal that protected these industries – and this report reveals the staggering losses that London could face as a result of the trade agreement.
“These losses could be even higher if the Government fails to secure additional agreements with the EU on hugely important areas of regulatory equivalence.
“The service sector is absolutely crucial to serving the wider economy – contributing billions in tax revenues to the Treasury every year, which goes towards funding public services in every village, town and city across the country.
“That’s why it is vital that the Government quickly closes the gaps in the trade deal for key sectors of our economy.”