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The Brexit camp’s own goal

by Sebastian Mallaby | 25.03.2016

If the Brexit campaign has an unofficial chief economist, it is Boris Johnson’s adviser, Gerard Lyons. Possessed of an appealing, blokish manner—brainy yet approachable, influential yet sideburned—Lyons is an effective voice for the Out camp and the source of Johnson’s claim that the economy would thrive in the event of a Leave vote. But much of what Lyons says is actually contrary to Johnson’s position. His writings hilariously capture the confusions within the Brexit camp.

Lyons has set out his view in “London: The Global Powerhouse”, a recent study from the London mayor’s office, where he serves as Chief Economic Adviser. The report makes so many reasonable points on the Remain side that it sounds like an advertisement for staying in the European Union. Britain’s economy has flourished by being open to Europe: London has made itself the headquarters for 40 per cent of Europe’s top companies, while 60 per cent of global non-European firms have chosen London as their base within the bloc. Membership of the EU—having a seat at the table when the EU debates policy—is “of high importance” for industries accounting for a third of London’s output: “finance and insurance, the professional, scientific and technical sector, and transport,” as Lyons’s report confesses. Presumably retailers, bookmakers and hairdressers are also going to earn less if their globally connected neighbours get whacked by Brexit.

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    How much will the economy suffer if the Brexit camp wins? Again, Lyons sounds like a closet Remainer: the uncertainty engendered by a leave vote would depress London’s economy for two years, he admits. But now, belatedly, Lyons attempts a pivot. Brexit should be tested not against a two-year forecast but rather against a 20-year one, he ventures. Of course, as a respected forecaster, Lyons understands that 20-year prognostications cannot possibly be precise.

    Now committed to his line of argument, Lyons grits his teeth and rolls out ultra-precise figures anyway. He proposes two Remain scenarios—one in a reformed EU, and one in an unreformed one—and claims that London’s output would grow from its current £350 billion to either £640 billion or £490 billion. Likewise, Lyons considers two Brexit scenarios—a rosy one and a dark one—yielding forecasts of £615 billion and £430 billion. But, aside from their spurious precision, the forecasts are not exactly friendly to the Brexit camp’s position. On Lyons’s numbers, the average Remain scenario is 24 percent better than the average of the two Brexit options.

    Boris’s optimism about the economic costs of Brexit is contradicted by studies from the CBI, the London School of Economics, and Oxford Economics. But what is more remarkable is that it is barely supported by his own economic adviser.

    This article is being published simultaneously in The Times

    Edited by Geert Linnebank

    One Response to “The Brexit camp’s own goal”

    • GLA Economics – where I worked for six years – has a reputation for professionalism and political independence. This study (“London: The Global Powerhouse”) mixes objective statistical analysis with advocacy for Brexit.

      Examples:

      (p43) “The UK can only achieve serious reform if it is serious about leaving, and it can only be serious about leaving if it believes this is better than the status quo of staying in an unreformed EU. It is.”

      (p20) “remaining in the EU means the UK has effectively no control over its borders”

      (p45) “it is clear that the UK has lost the capability to influence the direction of EU institutions since the creation of the euro area and since the signing of the Lisbon Treaty.”

      GLA Economics is publicly funded. It is wrong for it to be used as a vehicle for the Brexit campaign. Boris Johnson’s Brexit campaigning should be kept entirely separate from the research and analysis on London carried out by GLA Economics.

      Would I say the same if the study was pro-Remain, you might ask. A fair question.

      Provided it was evidence- and fact-based, I would have no problem.

      TheCityUK’s survey found that 84% of their senior boardroom respondents said that staying in the EU was the best option to secure the position of the UK as a global financial centre. Only 5% wanted the UK to quit the EU.

      And as Sebastian Mallaby notes, membership of the EU—having a seat at the table when the EU debates policy—is “of high importance” for industries accounting for a third of London’s output: “finance and insurance, the professional, scientific and technical sector, and transport.”

      I wrote the section of the earlier GLA Report which made this assessment:

      Pages 39-48 here:

      https://www.london.gov.uk/what-we-do/mayors-office-policing-and-crime-mopac/community-safety-0/europe-report-win-win-situation

      All the objective evidence suggests that remaining in the EU is – on balance – best for London.