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Brexit has destroyed any chance of levelling up

A new report shows red wall areas suffering more from Brexit than London does – and it will get worse

Image: The New European

There is good news and bad news from the latest big report into Brexit. The good news is that London will be less badly hit by Brexit than other parts of the country. The bad news is that other parts of the country will be worse affected than London. And London will suffer anyway.

While we are all worse off since we left the EU, it is those red wall areas that fell to the Tories on the back of Brexit and Boris Johnson’s lies that are suffering the most. The pain is less in those leafy suburbs of the metropolis that overwhelmingly voted Remain.

These are the findings of new research in Brexit by Cambridge Econometrics, commissioned by the Greater London Authority and Sadiq Khan. Personally, I think that report is rather too pessimistic in its overall assessment of the economic costs of Brexit – it claims it will cost the country more than 10% of economic wealth by 2035. And from me, that is saying quite a lot.

But the key point is this: it explains very carefully and rationally why London will be affected less by Brexit than almost all of the rest of the country.

The report finds that growth across the UK will be 0.4% slower each year because of Brexit but only 0.3% slower in London. It finds that by 2035, the UK will have 3 million fewer jobs than it would have had if we had stayed in the EU, but only 500,000 of those lost jobs will be in London.

Investment has already been slashed because of Brexit and by 2035 it is projected to be 32% lower than if we had stayed in the EU. That hits both output and productivity but it will hit both more in the regions outside the metropolis. Productivity in London will stay as expected and will not be hit by Brexit, but in the regions it will fail to keep up, widening the gap by more than 4%.

The regions are more dependent on trade in goods, which is badly affected and will continue to be for years. They are also where the foreign investment in manufacturing is concentrated and where the European distribution hubs are based, and therefore hit worse by the cuts in investment. They were also much more dependent on EU regional development funds.

The economic blows that this report highlights will last until at least 2035. By then the UK’s economic output, its level of investment, the numbers employed, and the level of productivity will all still be lower, much lower, than if the UK had remained in the EU. Looking at the report, the only positive for the country seems to be that by 2035 the trade balance will be in surplus – meaning we will be exporting more than we import – but only because imports will fall even faster than exports. So not a positive at all.

London doing not quite as badly as the rest of the country means that the huge economic gulf between the capital and the rest of the economy will get ever wider.

The UK is already made up of vast areas of economic poverty (some of the worst in Europe) with disastrously low productivity (some of the worst in Europe), with a few islands of wealth and efficiency: mainly London but also Edinburgh, Bristol and a few others. Attempts to reverse that trend by dragging other areas up to London’s level have never worked and now they probably never can. Brexit has finished off any such ambitions.

As this report doesn’t quite say but what is evidentially clear from its findings is that the Northern Powerhouse is dead and buried, and the idea of levelling up is now a sick joke. They were always just fancy PR stunts, electoral gimmicks, a way to con the poorer parts of the UK into voting Tory, but now the cat is out of the bag. You cannot catch up by slowing down more than those ahead of you.

It is certain that the UK will not now level up but that we will all level down instead. It is just that some of us, including the already poor parts of the country, will fall further down than others and stay there.

Why London – an international city, a tourist magnet, a financial and services behemoth, the go-to destination for the wealthy, successful and ambitious of the world, with three major airports and a train link to the continent – should suffer less than the rest of the country is obvious.

Many parts of Britain have none of those advantages. We cannot stop other regions being more dependent on trade with the EU, which they are, and therefore suffering more from barriers to trade, we cannot stop them losing more jobs as a result, we cannot stop foreign firms taking their investments elsewhere, we cannot stop productivity suffering as a result, we cannot replace the low paid, low skilled jobs with better ones, or replace the EU’s regional funds.

The rest of the UK will therefore lose productivity, wealth, and jobs in far greater numbers than the capital.

If this strikes you as poetic justice, shame on you. The parts of the country which voted for Brexit did so because they were already left behind, run down and ignored and they fell for the cynical liars who convinced them there was a once-in-a-lifetime chance of catching up – that the EU was taking all their money and immigrants were holding them back and Brexit would set them free. Now they will fall even further behind, London will become even wealthier in comparison, they will have fewer and worse jobs, they will be poorer and less healthy. Brexit has hit us all badly, but some are now even more unequal than others.

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