Feeling left behind City blames Brexit for UK’s £20bn productivity headache

For Rob Rooney, the impact of Brexit for the City of London is clear. "Frankfurt, Madrid, Milan and Paris are all doing better than they were. It has been at London's expense. No question about that.

- Richard Partington

In his time as Morgan Stanley's top executive in London, Rooney led the US investment bank's relocation of hundreds of bankers and billions of pounds of assets to Frankfurt to sidestep Britain's shock EU departure. More than 440 other City companies followed suit, moving almost £1tn between them - roughly 10% of the entire UK banking system - to the EU.

"I have friends and family who moved to Barcelona, Madrid and Paris. And these cities are all booming."

Before this month's budget, the economics of Brexit are high on the political agenda. Paving the way for big tax rises and spending cuts, Rachel Reeves has blamed the 2016 leave vote for Britain's recent growth weakness and an anticipated downgrade in the public finances.

The chancellor is understood to have been handed dramatically weaker productivity forecasts from the Office for Budget Responsibility (OBR), partly caused by Brexit, contributing to a shortfall of up to £40bn against her fiscal rules.

Last month Reeves revealed the Treasury watchdog would be "pretty frank" that growth since the vote had been worse than anticipated. After years of Labour playing down Brexit, it was a marked shift.

Productivity growth has disappointed across the western world since the 2008 financial crisis. But the UK has notched a significantly worse performance than many of its peers on the metric of output for each hour of work - which is a vital driver of economic growth, wages and living standards.

For years the OBR has overestimated that growth could return closer to the 2.2% annual average recorded before the crash. In the spring it predicted annual productivity growth of about 1.25% by 2029-30 - significantly above the estimates of other forecasters, including the Bank of England.