London did not vote for Brexit. Almost 60% of the capital’s voters chose to remain in the European Union in the 2016 referendum. London was perhaps being awkward, but it also had good economic reasons for wanting to stay.
The capital’s success has long depended on international trade, overseas investment and people arriving from around the world to work, study and start businesses. Leaving the EU was therefore always likely to affect London more than places with fewer international connections.
During the referendum campaign, Brexit supporters promised greater prosperity, less bureaucracy and exciting new trading opportunities. There was also that famous suggestion that leaving would free up £350 million a week for the NHS. The bus carrying that promise has presumably been delayed in traffic.
Has Brexit Damaged London’s Economy?
Separating the effects of Brexit from the pandemic, the war in Ukraine, inflation and other economic problems is not simple. Economists cannot put the country into a time machine and see what would have happened if the UK had remained in the EU.
However, most serious studies have concluded that Brexit has made the UK economy smaller than it would otherwise have been. Research published by GLA Economics in 2026 found that UK output had fallen behind comparable EU economies since the referendum. It also concluded that Brexit had restricted London’s potential growth, particularly in productivity, employment creation and wages.
This does not mean that London’s economy has collapsed. London remains one of the world’s leading business centres and has continued to outperform many other parts of the UK. The problem is not that London stopped growing. It is that the evidence suggests it could have grown faster without Brexit.
That is rather less exciting than the sunlit uplands we were promised, but at least the uplands are now sovereign.
The Effect on Financial Services
Financial and professional services are among London’s most important industries. Before Brexit, firms based in the UK could use European “passporting” arrangements to provide many financial services across the EU.
Brexit ended much of that automatic access. Banks, insurers and investment firms moved some staff, assets and operations to cities including Dublin, Paris, Frankfurt, Amsterdam and Luxembourg so they could continue serving EU customers.
Fewer jobs moved than some of the most alarming forecasts suggested. The City of London did not become an abandoned collection of coffee shops and luxury sandwich bars. It remains a major global centre for banking, insurance, foreign exchange, legal services and financial technology.
Nevertheless, London lost some business and influence to competing European centres. Firms now have to maintain additional offices, meet different regulatory requirements and spend more money demonstrating that they are following all the new rules. This was an interesting interpretation of the promise to reduce red tape.
More Barriers to Trade
The UK-EU trade agreement avoided tariffs on many goods, but it did not preserve the frictionless trading arrangements that existed when Britain was in the Single Market and Customs Union.
London businesses trading with Europe now face more paperwork, customs declarations, regulatory checks and restrictions. Large companies can usually absorb these costs, although they would undoubtedly prefer to spend the money on something more productive. Small businesses can find the additional administration much harder to manage.
London’s economy is dominated by services, including finance, law, consultancy, technology, media and the creative industries. The Brexit trade agreement provides less comprehensive access for services than it does for goods. This has created uncertainty over professional qualifications, data, contracts and the right to provide services in different EU countries.
The promise was that leaving the EU would allow Britain to trade more freely with the rest of the world. New agreements have been signed, but the EU remains one of the UK’s largest and closest markets. Geography, rather inconsiderately, refused to change after the referendum.
Changes to London’s Workforce
Freedom of movement allowed EU citizens to live and work in London without requiring a visa. This helped businesses recruit people for jobs at every level, from hospitality and construction to technology, finance, healthcare and scientific research.
Brexit ended freedom of movement and replaced it with an immigration system based largely on visas, salary thresholds and eligible occupations. London employers can still recruit from overseas, but the process is generally slower, more complicated and more expensive.
The change has been particularly difficult for industries that traditionally employed large numbers of European workers. Hotels, restaurants, construction companies, care providers and other employers have reported recruitment problems. Some have increased wages or invested in technology, while others have reduced their services or simply learned to operate with fewer staff.
London remains an international city, and migration from outside the EU has increased. The workforce has therefore changed rather than suddenly becoming entirely British. This may come as a disappointment to anyone who thought Brexit would mean being served in every London coffee shop by someone born within the sound of Bow Bells.
Construction, Hospitality and Retail
Construction has been affected by labour shortages and the higher cost of some imported materials. Both problems have several causes, but new barriers to recruiting European workers and trading with EU suppliers have not helped.
Hospitality businesses were hit especially hard because Brexit was followed by the pandemic and a sharp rise in energy and food costs. Restaurants, pubs and hotels have had to compete for a smaller pool of experienced workers while managing higher operating costs.
Retailers importing food, clothing and other products from Europe have faced additional paperwork, delays and transport costs. Independent shops and specialist suppliers are less able than major chains to spread these expenses across a large business.
London’s Creative Industries
London is a leading centre for music, theatre, film, television, fashion and the visual arts. These industries depend on people and equipment moving easily between countries.
Musicians and performers touring Europe now have to deal with different visa, work permit and equipment requirements. Bringing European artists into the UK can also involve more administration. Major organisations can employ specialists to manage the paperwork. Smaller companies and independent performers may decide that a tour is no longer financially worthwhile.
Brexit has not stopped London being creative. It has simply ensured that some creative people must now devote more of their creativity to completing forms.
Universities and Research
London’s universities attract students and researchers from across Europe and the rest of the world. Brexit initially created uncertainty about research funding, academic partnerships and the position of EU students.
EU students no longer generally receive the same fee arrangements as UK students, making London significantly more expensive for them. Universities have continued to recruit internationally, but some have seen changes in where their students come from.
The UK eventually rejoined the EU’s Horizon Europe research programme as an associated country. This restored access to an important source of research collaboration and funding, although only after several years of uncertainty. Apparently, leaving an organisation and then paying to participate in one of its programmes is also a form of taking back control.
Has London Benefited from Brexit?
Brexit gives the UK greater freedom to set its own regulations, immigration rules and trade policy. In theory, this allows the government to design policies that suit London and the wider UK rather than all 27 EU member states.
There may be opportunities in areas such as financial technology, artificial intelligence and trade with growing economies outside Europe. London’s international reputation, language, legal system, time zone and concentration of skilled workers continue to make it an attractive place to do business.
However, regulatory freedom only provides a benefit when it is used effectively. Different UK rules can also increase costs for businesses that must follow EU standards in order to sell into the European market. Having the freedom to create a second set of paperwork is not automatically an economic triumph.
London Has Remained Resilient
Despite Brexit, the pandemic and repeated predictions of its decline, London remains a powerful international city. Its financial and professional services sector is still one of the largest in the world. The capital also has strong technology, life sciences, education, tourism, media and creative industries.
London’s greatest advantage may be its ability to adapt. Businesses have opened European offices, changed supply chains, recruited from different countries and found new ways to serve customers. That resilience should not be mistaken for evidence that Brexit caused no damage. If someone throws several obstacles onto a running track and the athlete keeps going, the obstacles do not deserve credit for the performance.
What Happens Next?
The argument about whether Brexit was a good idea will probably continue for years, or possibly until the last surviving referendum campaigner is explaining customs declarations to a bored care-home assistant.
In practice, the important question for London is how the UK can improve its relationship with the EU. Reducing barriers to trade, making it easier for young people and skilled workers to move between Britain and Europe, and agreeing practical arrangements for services would all help the capital.
Brexit has not destroyed London, but nor has it delivered the easy prosperity promised by its most enthusiastic supporters. London remains successful because of its people, businesses and international connections. It has succeeded in spite of the additional barriers placed in its way, not because filling in more forms released its hidden economic potential.