Slowing growth in London since the Brexit vote has put the British economy on track to narrow the north-south economic divide over the coming three years, according to a report.

The accountancy firm EY, despite warning of a weaker outlook for almost every region through to 2021 amid continuing Brexit uncertainty, said London would no longer continue to grow at a much faster pace than the rest of the country.

Slower growth in the services sector was expected to have a more detrimental impact on the capital, where the bulk of services activity including the banking industry is concentrated. Meanwhile, other parts of the country have been “catching up” through stronger growth, it said.

London was forecast to outperform all other UK regions with an increase in its gross value added to the economy of 2.1% from 2018 to 2021, down from a rate of 2.5% over the three years to 2018.

The gap with the rest of the country was, however, expected to be smaller, as areas such as the north-east of England and Yorkshire and Humberside where manufacturing forms a larger part of the local economy perform more strongly.

The gross value added to the economy from the north-east was forecast to grow by 1.1% in the three years to 2021, compared with 0.8% in the three years to 2018. Yorkshire and the Humber was expected to see growth accelerate from 1.3% to 1.5%.

It comes as growth slows in the services sector amid a deterioration in family finances since the EU referendum, after the drop in the value of the pound pushed up inflation at a time of sluggish wage growth. On the flipside, the weakness in sterling has helped to make goods made in Britain more attractive for foreign buyers.

Mark Gregory, the EY’s chief economist, said significant imbalances remained in the UK economy, despite the forecasts for the north-south divide to narrow.

He added: “However, the recent slowing services sector growth has limited further increases in the geographic differences between north and south.”