What might the Brexit deal mean for London and ‘levelling up’?

What might the Brexit deal mean for London and ‘levelling up’?

“I have a present for anyone looking for something to read in that sleepy, post-Christmas lunch moment,” said Boris Johnson on Christmas Eve before holding up a stack of paper and declaring “glad tidings of great joy”. The stack of paper, he said, was the post-Brexit trade deal with the European Union. Why the grounds for exultation? The deal, said the PM, will “give certainty to business and travellers” and be “the basis for a happy and stable partnership with our friends in the EU for years to come”.

Since then, people with better heads for detail than the ex-London Mayor have been poring over the document’s 1,246 pages. Among the certainties they’ve found are guaranteed disadvantages for business and for travellers. Another is that a state of happy stability looks unlikely. The long-term implications for London in particular, with its global city character and huge service sector, remain hard to discern but hardly packed with promise. And although Johnson has told the Telegraph the deal will provide new freedoms to help him “level up” the UK, not everyone believes him.

The caution of early responses from London First and the London Chamber – relief at escaping “no deal” hedged with warnings that the settlement leaves little time for businesses to prepare for the new rules and may be far from “all-encompassing” – appears justified, judging by the opening remarks at a briefing held this morning by UK in a Changing Europe (UKCE). “This is an extremely complicated deal,” said Cambridge law professor Catherine Barnard. “The text is full of rules, exceptions to rules, cross-referencing, and there are signs in places where you can see it was done in a rush.”

Barnard also said the agreement of a “common provisions” framework, encompassing “three pillars” – the free trade agreement, law enforcement, and other stuff including “a huge number of annexes and protocols” – reflected a big win for the EU, as it was something the UK didn’t want at the start of the negotiations. On law enforcement, co-operation has ended up being closer under the deal than some had feared and expected. The UK has “recognised the value” of this, Barnard said, which might come as some relief to the Metropolitan Police. “Of course, it’s not what we’ve got at the moment but it’s still better than nothing.”

She also stressed that the deal as a whole “clearly envisages lots of further bilateral agreements, just like the Swiss have got”. Scope remains for “unilateral EU measures, including data adequacy and equivalence in financial services, which is about specific kinds of UK-based firms being able to sell directly to clients based in the EU. Johnson has claimed the City of London “will prosper as never before” but those “equivalence” arrangements can be withdrawn by the EU with 30 days’ notice, Barnard said. Finally, she underlined that the implementation of the deal is to be reviewed every five years. “A further fight” about whether it has been good for the UK appears certain before the end of 2025. A large bureaucracy of committees and working groups will created to make the vast new governance structure work.

UKCE’s Jill Rutter said the “relatively good news” is that the very thinness of the trade deal means businesses won’t have to make huge numbers of changes to how they operate, but there will still be lots for them to think about. Echoing Barnard, she said “this is not a final done deal in many respects, there are lots of decisions still to be taken, lots of details to be filled in” and potential renegotiations. “Whitehall will have to be thinking all the time as we implement this deal, ‘what does this mean?'” Rutter said. “The idea that this deal has liberated us from Brussels is [true] only up to a point.” It remains to be seen if claims that the agreement puts the UK’s relationship with the EU on “a stable basis,” she concluded. Much will depend on how the two sides behave. The UK will need to be careful not to step out of line.

Another contributor to the briefing, King’s College economics professor Jonathan Portes, thought a quite strong and rapid economic recovery possible in spring and summer next year, as long as the immediate Brexit disruptions don’t last too long and the Covid vaccination programme goes well. He pointed out that those who haven’t lost their jobs or faced a cut in wages have saved a lot of money, which could be spent with gusto once restrictions are lifted and consumer confidence returns.

But Portes warned that those economically hardest hit by Covid and least well off won’t enjoy the same recovery bounty – a big worry for London, with its high poverty rates, especially among children. And while pointing to “a strong consensus” that long term impacts on the UK economy will be negative, significant but “not, for the most part, catastrophic”, Portes said the most important issue might be “how that pain is distributed”. He said the losers from the deal will include “very much the financial and business services, the high productivity sectors of the UK economy.” In the capital, of course, the strength and scale of those sectors sustain many others, not least hospitality, culture and retail which in London have taken such a hammering.

Does the Brexit deal liberate the UK to forge a future free from long-standing economic problems? Those inequalities between and within regions, the dysfunctional housing market and – outside London – historically low productivity? Portes had some thoughts about that too. Those “persistent structural issues” haven’t had much to do with EU membership, he said. Brexit might have provided a “re-set moment” in terms of political rhetoric, but what about in concrete policy terms? “That remains to be seen,” he said.

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Categories: Analysis

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