Blog Post

Two years since the EU referendum, what has changed for London?

Nothing has changed. Really.

It is now two years since the EU referendum, and nine months before the designated date for Brexit. But, for all the gallons of ink and trillions of pixels that have been spent, we still know little about transitional arrangements, and almost nothing about long-term relationships with our European neighbours and their global trading partners.

Maintaining the flow of talent

We are still largely in the dark about the government’s plans for immigration: one positive move has been that overseas EU citizens living in the UK have had their right to remain confirmed, but the immigration white paper that was delayed to autumn last year has now been delayed to autumn this year. It will no doubt all be over by Christmas.

If government is really committed to delivering a Brexit that works for all parts of the country, it should create a nationwide working tourist visa for young people, and an immigration system with regional work permits. That way, London could remain open to the European and global talent that drives its success, without imposing its rules on the rest of the UK.

Remaining open to trade

Plans for trading relationships are equally unclear, and debate has generally focused on the Gordian knot of customs implications for the Irish border. But London’s overseas trade is concentrated in services rather than goods, so alignment with the regulations of the European Economic Area’s single market is as important to the capital’s bankers, lawyers, architects and tech entrepreneurs as customs procedures and tariffs are to manufacturers. Rejoining the European Free Trade Association (EFTA) – the ‘Norway option’ – would enable continuing participation in the single market), so that services could continue to be traded seamlessly across borders.

Last year, we argued for EFTA membership as an interim measure, but as negotiations continue, the case for choosing it as a long-term option is strengthening.

Fantasies of a deal that could offer the benefits of single market membership without requiring freedom of movement or compliance with other EU regulations have been dissipating. That deal is not on offer. The choice is between EFTA membership and a deal offering necessarily worse conditions. Political turmoil in Italy and other states will not have weakened the EU’s resolve; offering the UK a better bespoke deal could only encourage others to ask for more.

The impact of uncertainty?

But despite glacial negotiations and murky prognoses, we have not seen the exodus of investment, talent and employers that many were predicting two years ago either.

The number of jobs in London has in fact continued to grow slowly, indicators of business confidence recovered after a brief plunge, and estate agents report buoyant demand for offices, even if the top-end of the overheated housing market has cooled sharply.

The number of continental Europeans arriving in London to work has fallen, but it was already in decline before the referendum, in the wake of its 2014 peak.

Department for Work and Pensions

The UK economy may be growing slower than competitors’, but it has not been slammed into reverse gear.

But there’s a sense of hiatus, of waiting for the second shoe to drop. Though every individual investment announcement or relocation decision is seized upon by veterans of the Leave and Remain camps to show how they were right all along, perhaps there have been no consequences of Brexit because there has been no Brexit – and precious little progress towards it.

Time will tell whether businesses and investors are being bullish, hopeful or insouciant.

For the moment, Londoners are stuck in limbo, listening to looped debates about customs unions, invisible borders, free trade agreements and regulatory alignment, neither able to move on nor ready to retreat.

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Richard Brown is Research Director at Centre for London. Follow him on Twitter.