EU referendum

Brexit, London and local government: What next?

In a scenario many hoped, but it seems none had planned for, the UK voted to leave the European Union last week. It wasn’t until last Friday afternoon that the gritty detail of Brexit – the untangling of 43 years of legislation, constitutional convention and trade agreements – was laid bare.

So far the reaction of London has nicely followed the Kubler-Ross model of grief. The first stage, denial, manifested itself in the form of a well-intentioned but futile petition calling for London to secede from the UK and join the EU as an independent nation state. Anger, the second stage, has been realised in the ugly form of an increase in reports of hate crime. Sadiq Khan, alongside Nicola Sturgeon perhaps the only senior politician in the UK not going through an existential crisis this week, will be occupied with trying to reassure EU nationals and others that London remains an open and tolerant city.

Whether the next stages will be reached is yet to be seen, however, what is immediately clear is that the capital will take a big hit in terms of office space as corporates hold off on potential moves and expansions in lieu of the uncertainty created by our probable departure from the EU. High value residential and, of course, financial services will also be impacted. Despite the immediate gloom, it is worth remembering that a considerable amount of foreign investment in London comes from outside the EU and this could in fact rally around a drop in the value of the pound.

Nonetheless, the political challenge for the Mayor and London local authorities will be to ensure this shock to the market, and any potential recession, does not impact on plans to build more affordable homes in the capital. So far the response from the Mayor has been to make the case for staying in the EU single market and pushing for more powers to be devolved to London, including over housing, property taxes, skills and education.

Major housebuilders will be reeling from the impact on their share prices of Brexit, while local authorities will be looking at the two and a half years of uncertainty ahead (assuming Article 50 is triggered by the end of the year) and wondering what impact this will have on investment decisions and the future supply of homes. New sites are less likely to be brought forward until terms of trade are understood, and, if free movement of people is rescinded, there will be a huge skills shortage to build the new homes and infrastructure the UK needs.

The impact in London will be felt tenfold in the UK’s northern metropolitan centres and regions who gained a lot more from EU membership. There will be many council leaders and city mayors anxiously seeking alternative backers for ambitious (often EU-funded) regeneration schemes.

Politically we are in unchartered waters. Normally, during times of economic strife, politicians can take action. However, with both the Government and Her Majesty’s Opposition about to undertake protracted and acrimonious leadership contests, no major decisions will be taken to set a steady hand to the tiller. Decision making will be delayed, and this is likely to be reflected at a local level.

A number of Labour Council leaders have signed a letter calling for Jeremy Corbyn to go. Whether he does or not, he has many supporters in local Constituency Labour Parties (CLPs) so we can expect local Labour councillors’ time to be occupied with resolving disputes about the future direction of their party. The same will be true of the Conservatives now their leadership contest is underway.

Politics is about to become a lot more uncertain, inward-looking and ill-tempered at a time when it can ill afford to.

Written By

Alex Doel