Independent Studies Consensus on Impact of a "No-Brexit' Deal

London & Edinburgh

Brexit-Partners asked why the Brexit Secretary had ‘requested’ redaction of the business impacts set out in the 39 industry sector reports to Parliament [Insight: 28 December 2017].  Whilst this may keep the UK’s negotiating powder dry, it denies vital information for organisations everywhere as they begin preparations for Brexit.

It seems that we were not alone.  Within the space of four (4) days, two key stakeholders – City of London and Scotland - have published the results of parallel and independent studies that assess the Brexit impacts based on the differing scenarios that are presently foreseen.

Having worked through the documents, we can say that there is a high degree of consensus on the outcomes.

Whilst the scenarios chosen for analysis vary in detail, the outcome patterns correlate.  And whilst the findings are focused on the populations within their remit, each expands the forecasts to a UK-wide impact.

Mayor of London

In total, five scenarios were modelled by Cambridge Econometrics to illustrate the range of possible outcomes of the UK’s future relationship with the EU.

Mayor of London, Sadiq Khan, reports that a 'no deal' hard Brexit could lead to a lost decade or longer of significantly lower growth. This scenario could result in 87,000 fewer jobs in London by 2030.  Of special significance to the City is that financial and professional services would be the hardest hit.  Other key London sectors that would be adversely affected include science and technology, construction, and the creative sector.

The report goes on to show that London could suffer much less from Brexit than the rest of the country - increasing geographic inequalities across the UK – with potential losses of 500,000 jobs and £50bn investment lost UK-wide in the next decade.

Even softer Brexit scenarios [1] – such as the UK remaining in the Single Market, but leaving the Customs Union after a transition period - result in fewer jobs across the country.

With time running out to make considered preparations, the Mayor put an absolute backstop of October 2018 to complete negotiations.


Today, 15 January 2018, Scotland’s first minister, Nicola Stugeon published a Brexit Impact Analysis report hoping to boost the prospects the UK staying in the single market.  She described the findings as: “more detailed and extensive than anything so far provided by the UK Government” - and showed that if the UK has to leave the EU, staying in the single market was “the least damaging option by far”.  It was, she said: “absolutely, manifestly, beyond any doubt the option that will do the least damage to our economy”.

The report focuses on the impact of Brexit on the Scottish economy, but like the London study, demonstrates the implications for the debate in the UK generally.

The Scottish government report said Scotland’s GDP would be 8.5% lower by 2030 if the UK traded with Europe on WTO terms (hard Brexit).  However, it would only be an estimated 2.7% lower provided the UK stayed in the single market.

Sturgeon said restricting EU migration would be bad for the Scottish economy. The report said:  ‘Scotland’s economy benefits significantly from EU migration.  EU citizens are helping to grow our economy, address skills shortages within key sectors and make an essential contribution to our population growth.  Over the last decade population growth has been the primary driver of GDP growth and this has been driven chiefly by inward migration.’

Brexit mitigation

Meanwhile, Brexit-Partners note that some organisations are not waiting to act in order to protect their futures.  This includes Lloyds of London - among the most vocal financial businesses on the need for an EU subsidiary should Britain lose access to the single market after leaving the bloc.

Lloyds are amongst the first to publically announce their response.  Housing more than 80 syndicates from their iconic building in London, the syndicates focus on specialist insurance and reinsurance in anything from oil rigs to athletes’ legs.

They have chosen Brussels as the site for its EU subsidiary because of its strong regulatory framework.  Today [15 January 2018] Chief Executive, Inga Beale announced that: “We are hiring people...and will have the Brussels subsidiary up and running by January 1, 2019 - ahead of the official exit date - but we run a market and we want to be ready for all of our businesses and syndicates that operate within the wider market.  That is why we are really pushing ahead.”

Beale said that the application for setting up the Brussels subsidiary had been lodged with the Belgium regulator – whilst Lloyd’s is actively seeking office space and adapting its technology systems.

Brexit-Partners have been tracking 4 scenarios for impact on their client organisations.  The London study uses an additional sub-scenario of: ‘hard Brexit at the end of 2-year transition’ which is a simple matter of timing and not substance. The London study scenarios are:

Scenario 1.  ‘Close to status quo’.  UK remains part of both of the single market and customs union;

Scenario 2.  UK remains part of the single market, but not the customs union;

Scenario 3.  UK remains part of the customs union, but not the single market;

Scenario 4.  ‘hard Brexit’ in which trade between the UK and the EU falls under World Trade Organisation (WTO) rules with a two-year transition period from March 2019;

Scenario 5.  As scenario 4, but without a two-year transition period.

John ShuttleworthComment