I publish the following, having noted that I am a non-executive director of Cambridge Econometrics:
Cambridge Econometrics' study ‘Preparing for Brexit' published today by London Mayor Sadiq Khan suggests that while London will emerge relatively better that the rest of the UK following Brexit, the size of the UK economy will reduce*.
The analysis also shows that Brexit is likely to put the UK on a slower long-term growth trajectory**.
It is thought that London will emerge relatively better than the rest of the UK because it has a higher concentration of high-value sectors, which are more resilient and able to recover from economic shocks more quickly.
The Mayor of London, Sadiq Khan, said:
“This independent analysis of Brexit reveals the potential economic risks — and human costs — at stake in the negotiations …. I've released these impact assessments because the British people and our businesses have a right to know the likely impact on their lives and personal finances.
This new analysis shows why the Government should now change its approach and negotiate a deal that enables us to remain in both the single market and the customs union.”
Analysis is first of its kind
The study is the first comprehensive assessment of Brexit across key indicators and sectors at a sub-national level and provides new insight into the local economic impacts of the UK's exit from the European Union.
Ben Gardiner, Director at Cambridge Econometrics, said:
“This is the first time that the impact of Brexit has been comprehensively assessed across a number of key indicators and sectors at sub-national level, in this case clusters of London boroughs in both inner and outer London.
“The study adds a new dimension to existing studies and offers a valuable insight into the potential impact of Brexit on employment and output under a range of scenarios.
“We think that this approach could be applied to other parts of the UK to help political and business leaders plan for the future.”
Key findings
Negative impact on investment
The modelling results show that Brexit will have a negative impact on the UK economy across all key indicators, in particular on investment where £20.2bn would be lost by 2030 under the ‘softest' scenario and £46.7bn under the most severe Brexit scenario.
Employment will fall
London is expected to experience a loss of 30,500 people in employment under the ‘softest' scenario, rising to 87,000 under the ‘hardest' scenario, by 2030.
However, it is not expected to be as negatively affected as the rest of the UK, in terms of GVA and productivity. This reflects the higher concentration of high-value sectors in London, which are more resilient and able to recover from economic shock more quickly.
Financial and professional services sector will be hit the hardest
The financial and professional services could experience up to 119,000 fewer jobs nationally in 2030 than would otherwise be the case.
However, the science and technology, creative and construction sectors, which make up a high proportion of economic activity in the UK, particularly in London, are also sectors which will be hit hard by Brexit.
To read the full report, please see Preparing for Brexit
*compared to what may have happened if the UK remained in the single market and customs union.
**the economy is still expected to grow, but at a slower rate than if Brexit did not occur.
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There is a Guardian article on the report here: https://www.theguardian.com/politics/2018/jan/11/brexit-uk-could-lose-half-a-million-jobs-with-no-deal-says-sadiq-khan
One small request. Is it possible to make the report available as a PDF. My apple version of word does funny things.
I have already made that request
Richard, I’m getting a ‘page not found’ on the full report link. Any chance you could update please?
Link was changed to a PDF
I have updated it now
Hi.
Did your report consider possible positive economic offset of new deals from the ROW or did it purely focus on relations with the EU assuming no other interactions?
Thanks
I was not responsible for any part of the report
I saw it late last night for the first time
I suggest you ask on the CE blog
I’m reading it now, but so far have not found any indication that any of the scenarios, or the prospective growth figures consider the possibility of a second GFC.
With respect, this is rather optimistic.
I think that fair comment
I also think no one can forecast for that
No we probably cannot predict for the precise ‘when’ of GFC2, but the ‘if’ I think is almost certain in the time-scales with which the report is dealing.
All the losses predicted in this report would likely be rendered moot after the next EU-wide banking crisis – and the talk of lost growth for our services sector do not appear to consider it ever having to be bailed out again.
I’m happy to be corrected on this, but I don’t think that a single mainstream economist or institute has assessed Brexit in these terms. After all the hand-wringing after the last GFC this really is some omission.
FWIW I think we’ll be much better off out when the next one comes along – capital controls and immediate bank nationalisations will be essential, because I think it’s going to be a biggie. Some kind of ‘soft Brexit’ position until then will probably be good, as long as we’re not completely tying our hands for when the next crash occurs.
I have to say I do not think anyone could forecast the outcome of the next crisis
And if they tried the margin for error would be so great it would not be worthwhile
I’m sure that the economy will deflate as predicted.
“All the losses predicted in this report would likely be rendered moot after the next EU-wide banking crisis”
An EU wide crisis, if it includes the non Eurozone of the EU – ie sterling, will be worldwide.
I suppose now that it is only a matter of time before the other side releases an econometric ‘modelling’ report telling us that Brexit will make us better off. Most of us won’t be able to discern the differences well enough to know who which of the two is more reliable
Its hard to pull the con tricks out of econometrics.
Yes- one would have to be very well versed in the maths and the assumptions behind the modelling. There are some economists ( Tony Lawson at Cambridge-himself a mathematician) who see much of the econometric as irrelevant and an inappropriate use of a tool. here’a bit ofblurb about him:
‘He has argued firstly that success in science depends on finding and using methods, including modes of reasoning, appropriate to the nature of the phenomena being studied, and also that there are important differences between the nature of the objects of study of natural sciences and those of social science.’
That’s an interesting report. I might scan it to see how they worked out why, of the 10 non-EU self governing territories in North and West Europe, only one is worse off than its nearest EU neighbour and that is the one with the least amount of self-government. ( GDP/head by PPP )
The 10 in question are Swi, Nor, IoM, And, Mon, Jer, Gue, Lie, Ice and Far, with Faroes being the odd one out.
You’d think there would be a connection with living under your own laws, but no doubt Cambridge Econometrics have made an excuse for every single one of them that explains their relative prosperity, and its nothing to do with not being in the EU.
Tax haven
Oil
Tax haven
Tax haven
Tax haven
Tax haven
Tax haven
Tax haven
The exception
As you have noted
That is your answer
Next stupid question?
As predicted the report fails to mention the primary fiscal activity of the EU and there’s no mention of the inconvenient fact that the non-EU countries that are in the SM but not in the CU are actually more not less prosperous. I mean the EU has a budget, right, the people who work for Cambridge Econometrics are permitted to look at it, and there is not one single mention of the word ‘subsidies’ or its derivations.
As for the UK we have lots of natural gas under our feet, or so the fracking industry tell us, and it looks like being a ‘tax haven’ correlates with prosperity. And non-EU Iceland, Switzerland and Norway are in the lowest inequality grouping in world league tables.
You are ignoring the issues I raised, which are the glaringly obvious ones
Well those, and the fact that to compare tiny locations with the U.K. makes no sense at all.
With respect, you waste my readers’ time
Also interesting from the report is the dismissal of ‘Unilateral Free Trade’ as a post-Brexit model as that model is an ‘outlier’.
What is certain in your view is that the dominant model in non-EU countries in N&W Europe is ‘Tax Haven’, so that’s a model which is not an outlier at all, and the Cambridge Econometrics team didn’t bother to look at it.
That’s what I call consistency.
‘Tax haven’ is an outlier
It isn’t for Manoca, Andorra and Jersey et al
But for the UK?
Please do not be far fetched
I am not quite sure what point Mr Pendant is trying to make; but ‘prima facie’ it appears logically flawed. Tax havens, he seems to suggest, are not outliers? The list provided is of successful economic minnows, which are tax havens. They are successful because they are tax havens (outside the mainstream). Tax havens are not mainstream (how can they be?), hence they may be classified as ‘outliers’. If they were not ‘outliers’ then they would represent the mainstream; but if they were mainstream, then in effect the mainstream would become ‘tax havens’ (everybody would do it). If the mainstream are tax havens, in what sense would there be any “tax havens”? The category would dissolve. Of course self-evidently the mainstream are not tax havens; hence there is an economic space for tax havens, operating as outliers. Tax havens, in short depend on being outliers.
By all means disprove the proposition Mr Pendant (but no waffle please).