ADD2142 The impact of leaving the EU on London’s economy

1.1 The impact of the vote to leave the EU is one of the largest potential economic effects on both the London and the UK economies, in both the short and long-run as has been highlighted by research published by a number of organisations prior to the June 2016 referendum . However, the size of these effects remains unknown as this depends on the ultimate form of Brexit, and knowledge of the post-Brexit UK economic environment across a range of dimensions such as trade, migration, and regulation.

1.2 In the short-run, beyond the direct impact of the decline of sterling, the impact of Brexit on the UK economy has been open to debate.

1.3 The long-term impact of the vote to leave the EU is very dependent on what post-exit deals the UK negotiates with the EU and other countries around the world. It is also dependent on a number of other factors such as agreements on research collaboration and funding, the perception of London and the UK as a place to do business, the post Brexit taxation environment in the UK, and any tightening of the UK’s migration regime leading to restriction in London’s labour supply.

1.4 One possible form of Brexit would involve relying on WTO trading rules and although other forms are possible it is widely believed that such a Brexit would have a significant impact on London’s economy. In order to examine this belief objectively and to plan the response to any type of hard Brexit (if one was to occur), the GLA needs to know the potential impacts, both on headline indicators for the London economy, as well as more detailed analysis on those parts of London likely to be most heavily impacted. The GLA also needs to know how the impact of a form of hard Brexit will affect the rest of the UK and, specifically, how the impact in the rest of the UK will play through to London and conversely how the impact on London will play through to the rest of the UK.

2.1 To produce a forecast analysis of the economic outcomes for London and the rest of the UK of various Hard Brexit scenarios against the baseline of membership of the EU over the next 15 years, with a look at both the immediate impact of the event and the longer-term impacts.

2.2 To present the envisioned scenarios to include, but not necessarily limited to:

• UK membership of the European Economic Area

• A bespoke negotiated bilateral agreement model

• Trade under WTO rules

• Other variants of a Hard Brexit such as a Hard Brexit plus meeting the Government’s migration target

2.3 A set of further forecasts for Hard Brexit examining the impact on, but not necessarily limited to:

• Output

• Employment

• Investment

• Household Income

• The sectors of London’s economy with those sectors particularly heavily impacted highlighted in the report

• The cultural and the science and technology sectors

• Start-up and scale-up enterprises

• The rest of the UK

2.4 An Invitation to Tender will therefore seek a suitable organisation to undertake research to develop our understanding of the possible impacts on London’s economy of various Brexit scenarios. This process will require the delivery of detailed forecasts for both the immediate and the long-term impact of the Brexit process.

3.1 No adverse equalities impacts are identified. The analysis and report will support the GLA’s equalities objectives by helping to inform the Mayor about which parts of London are likely to be most affected by a Hard Brexit.

4.1 The contract will be managed via TfL procurement under the existing GLAE procurement framework.

4.2 If this analysis was not carried out it would limit the GLA’s ability to plan how best to respond to the impact of a Hard Brexit.

4.3 As with all forecasts, there is a risk that none of the imagined scenarios will occur and that the forecast is inaccurate.

4.4 All bids will be considered against technical criteria and value for money assessment. The breakdown of assessment for bids will be based on 75% of the available marks assigned to technical aspects, and 25% relating to the price quoted to undertake the research. The specific criteria are outlined in the following table:

All bids will be assessed on a six-point scale across each criterion, outlined as follows:

5.1 The expenditure of up to £50,000 will be funded from the Executive Director of Communities and Intelligence Minor Programmes budget for 2017-18, held within the Communities and Intelligence Directorate.

6.1 It is within the GLA’s powers, under section 30 of the Greater London Authority Act 1999, to promote economic development and wealth creation, and social development, in Greater London, and its subsidiary powers under section 34 to do anything facilitative of the exercise of its functions, to carry out research into the economic effects on London of reasonably foreseeable external events, such as the proposed departure of the UK from the EU.

7.1 The following table gives an outline of the provisional timescales for this research, however bidders are invited to suggest amendments to intermediate milestones within their tenders, or recommend timescales based upon the approach they wish to use to address the needs of the GLA: