City leaders have blamed Brexit for the UK’s worsening productivity performance, which has landed Chancellor Rachel Reeves with a multibillion-pound budget shortfall. Rob Rooney, former Morgan Stanley chief in London, said the impact was clear: Frankfurt, Madrid, Milan and Paris are booming at London’s expense. More than 440 City firms have relocated nearly £1tn of assets – roughly 10% of the UK banking system – to EU hubs since the 2016 leave vote.
The Office for Budget Responsibility (OBR) is expected to slash its forecast for trend productivity growth to about 0.9%, down from its spring prediction of 1.25%. This tiny adjustment would add roughly £21bn to government borrowing by the end of the decade, exacerbating the £40bn gap Reeves must fill against her fiscal rules. The chancellor has indicated the watchdog will be “pretty frank” that post‑2016 growth has been worse than anticipated.
Productivity – output per hour worked – has grown just 1.5% since 2019, dragged down by the pandemic and Brexit. Experts say erecting trade barriers with the UK’s largest partner has cut long-term productivity by around 4% relative to remaining in the EU. British exports have fallen behind the G7 average, with cars, chemicals and pharmaceuticals especially hit. Financial services output has been weak, and the UK’s share of global finance has slumped to 15% from 21% in 2010.
