The UK’s economy, once turbocharged by London’s financial sector, now seems stuck in low gear. The numbers don’t lie — productivity is sliding, growth is sluggish, and the country’s finance powerhouse is no longer delivering the goods. What happened? Increasingly, fingers are pointing at Brexit.
When voters chose to leave the EU in 2016, the full economic fallout wasn’t immediately clear. But nearly a decade on, the effects are mounting — from missed investment to a migration of financial institutions out of London. Now, experts warn that the UK’s long-term productivity is seriously under threat.
Shifts
Rob Rooney, former head of Morgan Stanley in London, knows this shift all too well. Under his watch, the bank moved hundreds of staff and billions in assets to Frankfurt, just to keep serving EU clients. They weren’t alone — over 440 firms shifted close to £1 trillion in assets, about 10% of the UK’s entire banking system, to European cities.
Paris, Madrid, Frankfurt, and Milan didn’t just benefit — they boomed. Meanwhile, London, once the uncontested financial capital of Europe, saw its global market share tumble. It was a silent shift, but a seismic one.
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Productivity is the backbone of any strong economy. It’s the measure of how much value we create for every hour worked. And in the UK? That backbone is buckling.
Since 2019, productivity has grown just 1.5%. The Office for Budget Responsibility (OBR) had predicted growth to rebound to 1.25% a year by the end of the decade. But that was before the latest data came in. Now, the forecast is closer to just 0.9% a year — a small change on paper, but one that could cost the UK £21bn in extra borrowing by 2030.
Here’s the story in numbers:
| Indicator | Before Brexit | After Brexit |
|---|---|---|
| Average productivity growth (annual) | 2.2% (pre-2008) | 0.9% (projected) |
| Assets moved by City firms | – | £1 trillion |
| UK finance global market share | 21% (2010) | 15% (current) |
| Productivity growth since 2019 | – | 1.5% total |
Fragmentation
One big problem? Fragmentation. Banks like HSBC, Citi, and Goldman Sachs were forced to duplicate roles and operations across multiple EU cities just to stay in the game. That means extra costs, more red tape, and less efficiency.
Instead of having a single base in London, banks now juggle offices in Frankfurt, Dublin, and Amsterdam. This isn’t just more expensive — it’s a major drag on productivity.
Blame
For a long time, politicians tiptoed around the “B-word.” But that’s changing. Labour’s Rachel Reeves now openly blames Brexit for the UK’s economic woes — and she’s not wrong.
Experts agree: putting up trade barriers with your biggest partner was always going to hurt. The OBR estimates Brexit has knocked around 4% off UK productivity long-term. It’s not just theory — it’s showing up in the export numbers. Since the EU transition ended in 2020, UK exports have badly trailed other G7 nations, especially in cars, chemicals, and food.
Even the financial sector, where services exports have done better, has lost ground. Before Brexit, City banks were a key driver of growth. Now? They’re dragging the average down.
Weakness
Financial services still contribute massively to the UK economy — but not like before. The productivity rate of the finance sector has stagnated since 2016, and there’s little new investment to reverse the trend.
It’s not just the banks. London itself, once the engine room of the UK economy, has lost its edge. It remains highly productive in terms of output per worker — but the growth has stopped. And in a country already marked by regional inequality, that’s a big problem.
Tension
Labour’s plan? Reform the planning system, ease red tape for businesses, and negotiate smarter trade deals. The idea is to boost productivity without reopening the debate about rejoining the EU or single market — a tightrope walk, to say the least.
Some economists argue that simply blaming Brexit isn’t enough unless you’re willing to change course. Others go further, warning that pre-crisis growth was unsustainable, built on high-risk finance and deregulation.
That’s the challenge facing policymakers: how do you get the money machine humming again — but without overheating?
Hope
There are signs of life. Fintech firms like Hyperlayer, now valued at £150m, are stepping into the gap. Rooney, now CEO of the UK-based startup, believes Britain still has the edge in innovation — but warns that without serious support, promising firms may end up heading to the US to scale.
The UK’s financial future might lie not in big banks, but in smart tech. The trick will be creating the right environment to keep those companies here and growing.
Whether Brexit is fully to blame or just one of many factors, one thing is clear: the UK needs to fix its productivity problem, fast. Otherwise, the “money machine” won’t just be misfiring — it might stall completely.
FAQs
How much did Brexit cost UK productivity?
Roughly 4% off long-term productivity, experts estimate.
Which cities gained from London’s loss?
Frankfurt, Paris, Madrid, Milan, and Dublin saw significant financial growth.
Why did banks leave London after Brexit?
To retain EU market access, banks opened offices across key EU cities.
Is the UK finance sector still strong?
Yes, but growth and investment have largely stalled since Brexit.
What is Labour’s plan to boost productivity?
Labour plans planning reforms, red tape cuts, and improved trade deals to revive productivity.
