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What Brexit means for London: businesses’ first thoughts

London First surveyed our members shortly after the EU referendum result. The survey told us that 31% of members think dealing with the consequences of the EU vote should be our top priority.

Following on from this over the summer we ran a series of Brexit breakfasts to understand in more detail what London business sees as the opportunities and threats from the Brexit process; to get a sense of what matters most to business in a final deal with the EU; and, to determine what value London First can add in achieving the best outcome for London.

The breakfasts were themed by sector: global trade, planning, housing and built environment, skills and immigration, infrastructure and tech.

Below is a summary of our members’ feedback and our next steps on making the Brexit process work for London.

Member feedback and London First next steps

Unsurprisingly the issues thrown up by Brexit are complex and overlap, but some clear themes emerged along with a good idea of the next steps we need to take in developing a programme to inform the debate.

Single Market

  • The EU and the UK economies are highly integrated, the specific effects of loss of preferential Single Market access is not well understood, but the risks are on the downside and will have consequences for companies trading in both goods and services.
  • While the passporting issue is often associated narrowly with financial services, because of the importance of this sector to London’s economy, the loss of the right of establishment (of a branch and/or agents) or providing cross-border services, would have a negative knock-on effect across the rest of London’s economy.
  • There are many areas where the UK may have to maintain EU regulatory equivalency (for example in data regulation). More work is needed to better understand what sectors are most affected.
  • Given London’s reliance on the services sector, businesses outside London may place a greater emphasis on Single Market access.

Access to talent

  • Access to global talent is the key issue for many London First members.  A post-Brexit immigration regime which is liberal, data-driven and treats all countries equally could be better than free movement in EU/tough controls for elsewhere.
  • London’s attractiveness to high-skilled international talent is closely tied to its access to the Single Market.
  • Losing free movement will place a greater pressure on domestic skills training and as London’s needs are distinctive it strengthens the case for skills devolution.
  • The scale of London’s need for high skilled international talent is likely to be different to the rest of the UK.

Managing uncertainty

  • Business is facing a period of uncertainty at least in the short to medium-term. To some extent this is unavoidable but there are steps the government could take to mitigate some of this uncertainty.
  • The government should move quickly to build confidence and address policy uncertainty where it can; for example, infrastructure investment and sectors where regulatory equivalence is critical and time critical.
  • There may be longer-term opportunities around interventions currently not possible under EU state-aid (e.g. public procurement, industrial strategy) which could be mobilised to support growth.

Brexit programme – next steps

There are a number of policy and research work areas London First has in progress which address some of the Brexit implications and some potential new ones under review.

London Calling

  • We want to take a quick look at the thriving London economy of the future: what will the sectors be and what are the jobs that young people want? Also, how can we make sure that the London economy of the future sits more easily within the rest of the UK, spreading economic development, as well as contributing to the exchequer?
  • We are commissioning a short study and hearing from young people and other parts of the UK – guided by a group of entrepreneurs. This is a calling card to the government that we are looking for the best possible future post-Brexit.

London 2036: An Agenda for Jobs and Growth

  • We are currently working with McKinsey to update the 2015 report done for the Mayor and the London Enterprise Panel. The aim of the exercise is to understand the economic development priorities for London in the context of the decision to leave the EU. Members will have opportunities to input to the work over the autumn and we aim to publish in early 2017.

Autumn Statement

London’s Labour Market

  • Discussions with members and stakeholders have shown we simply don’t have the information needed to make good policy about the number and distribution of European workers in London’s economy. London First will shortly undertake quantitative research with a partner to plug this gap in the evidence. The analysis will be undertaken over the autumn with the evidence base ready at the beginning of 2017

Industrial Strategy

  • The government has signalled the return of an “industrial strategy”. The track record of government intervention in the economy isn’t encouraging, and we wouldn’t want a return to 1970s style industrial policy. We intend to better understand what a new industrial policy means for London.
  • The work will kick-off with an event and a panel of experts who will debate this issue in more detail, by reviewing what we know about the government’s possible approach and trying to better understand how industrial strategy could support London’s growth.

Contact: David Lutton, dlutton@londonfirst.co.uk

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