Brexit Bulletin: 482,000 Jobs?

  • London Mayor commissions study on impact of Brexit
  • May meets bankers Thursday as Brexit has already hit industry
MEP Woolfe Sees EU as Concept of the Past

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Anti-Brexit London Mayor Sadiq Khan has commissioned a study on the impact of the worst-case divorce and the numbers are dramatic: 482,000 fewer jobs and £46.8 billion ($63 billion) less investment by 2030.

Khan wants to maintain as close ties to the European Union as possible after the split – if necessary with special arrangements for London – and has broken ranks with his own Labour party by suggesting a second referendum could be held. The study he commissioned from Cambridge Econometrics analyzed five Brexit scenarios, from the hardest to the softest exit, and broke down the impact on different industries.

In the worst-case scenario, Prime Minister Theresa May would fail to secure a two-year transition to ease the passage for businesses or a deal on the single market and customs union, a situation that in London alone may mean 87,000 fewer jobs and usher in 10 years of lower growth, Bloomberg’s Alex Morales reports. The numbers compare with “what would otherwise have been the case,” according to the mayor’s office.

London Mayor Sadiq Khan.
Photographer: Jason Alden/Bloomberg

Negotiations on the future trading relationship are due to resume in March, with the status of banks the major battleground. The study said that in a no-deal hard Brexit scenario, the industry that would fare the worst would be financial and professional services, with as many as 119,000 fewer jobs nationwide.

The study also argues that leaving the EU will increase the inequality between London and the rest of the country – something many Brexit-backers were hoping to reverse – as London’s economy will prove more resilient to the shock.

Khan ordered up the analysis after Brexit Secretary David Davis was forced to admit that a series of detailed impact studies on the possible consequences of leaving the EU didn’t really exist. Lawmakers made Davis publish the studies, which he had previously described as containing “excruciating detail,” but when they were released lawmakers complained they contained little that wasn’t already in the public domain.

Brexit Latest

Extendable Transition? | The EU doesn’t completely rule out the possibility of extending the planned transition period beyond the end of 2020 if necessary, according to two officials familiar with the discussion among EU27 envoys in Brussels on Wednesday. Extending it beyond 2020 would run into complications with the next EU budget, and would be unpopular with Brexit-backers in the U.K.

Ministers in the Dark | Robert Peston of ITV reports that some ministers are uneasy that they haven’t seen the Treasury’s analysis of the economic impact of the different scenarios for the future trading relationship with the EU, and are uncomfortable about making decisions without having access to all the information. “Even the prime minister’s most senior ministers are not being trusted to see what the Treasury assesses are the costs and benefits of different trading arrangements with the EU’s single market,” Peston writes on Facebook.

German Stance | Germany isn’t willing to budge when it comes to giving the U.K. market access for its financial-services firms, Bloomberg’s Birgit Jennen and Ian Wishart report. The U.K. cannot hope for a trade agreement that includes financial services unless Britain agrees to make substantial contributions to the EU budget and adheres to European law, according to German officials from two key government departments in Berlin. That sounds a bit like a Norway-style arrangement, which the U.K. has ruled out.

German Trip | Chancellor of the Exchequer Philip Hammond and Brexit Secretary Davis are in Germany this week in an effort o sell the U.K.’s case for a tailor-made Brexit deal. Hammond called for the EU side to speed up its preparations for trade discussions, and complained that the EU wasn’t ready to start talks, even as the bloc complains that it needs more clarity from the U.K. side. Hammond also told a conference in Berlin that European politicians should move on from the “narrative of punishment.”

Talking Cars | Business Secretary Greg Clark was due to meet with PSA Group Chief Executive Officer Carlos Tavares on Wednesday seeking reassurances on the automaker’s U.K. manufacturing. Clark was to raise his concerns about the future of PSA’s Ellesmere Port site, after the Unite Union on Monday said workers were advised of an additional 250 job cuts there, on top of 400 announced in October.

Meet the Bankers | May will meet a group of City financiers on Thursday to discuss safeguarding London’s financial services in the post-Brexit trade deal. Aviva Plc, Goldman Sachs International, HSBC Holdings Plc, Prudential Plc and the London Stock Exchange Group will meet May and Hammond at the premier’s office. Bankers will want to know how far up the priority list they are when it comes to trade talks, and whether the government is prepared to blur its own red lines to maintain market access. Banks are preparing for the worst and are way ahead of other industries when it comes to contingency plans. A survey showed on Thursday that job vacancies in the city fell 52 percent in December, the most in three years.

Coming Up | The European Commission will hold a seminar for EU27 government representatives to discuss the future trade relationship with the U.K. May speaks at an event about environmental issues and plastic; there could be a Q&A afterwards. Trade Secretary Liam Fox takes questions in Parliament and Davis is in Munich.

And Finally...

John McDonnell, the would-be Labour chancellor of the exchequer who shocked markets last year by saying he would be prepared for a run on the pound if Labour came to power, will attend Davos this year.

He will “set out why it is vital we rewrite the rules of the global economy” and explain Labour’s plan to “replace the current model of capitalism that has failed the many and led to an unsustainable concentration of wealth and power in the hands of the few,” the party said in a statement.

The Labour Party under Jeremy Corbyn and McDonnell has said it’s pleased to be seen by banks as a threat and pledges it would be a “radical government” if it came to power.

John McDonnell.
Photographer: Chris Ratcliffe

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