London could lose more than a million jobs if Britain quits the EU and fails to adopt more outward-looking trade policies, according to a report commissioned by London mayor Boris Johnson.

In those circumstances the British capital could shed 1.2 million jobs and lose out on tens of billions of pounds of GDP, the report says.

At the same time, it says, Britain could leave the EU without disastrous consequences but only if it does not turn in on itself.

The document by Gerard Lyons, chief economic adviser to the London mayor, will say the best economic scenario for Britain over the next 20 years is to remain in a “significantly reformed” EU. That echoes the position of British prime minister David Cameron.

“But if, as an alternative, the UK leaves the EU on good terms, while adopting sensible outward-looking trading policies, that comes a very close second,” Mr Lyons said.

At a speech in the City on Wednesday, Mr Johnson will set out an eight-point plan for reform of the bloc.

Referendum

Mr Lyons, a former chief economist at Standard Chartered bank, said that leaving the EU was “definitely a viable option”. He pointed to modelling by Volterra, an independent economics consultancy.

Volterra predicted London’s GDP would grow from £350 billion to £640 billion by 2034 if Britain stayed in a reformed EU, against just £495 billion if the UK remained in an unreformed bloc.

But if Britain pulled out and adopted an open trading regime, the capital’s economy could still grow to £615 billion over the next 20 years, only slightly less than under the first scenario.

By arguing that the City of London could survive a British exit, the report could give a further boost to those who believe Mr Cameron should adopt a tougher stance on the EU.

However, Mr Lyons’s report also offers a scenario that could have a devastating impact on London’s economic growth.

Under this model, if Britain leaves the EU and fails to adopt a “more outward-looking trading regime”, London’s economy would then grow to just £430 billion. This is the only scenario – of the four – in which the capital loses jobs.

Mr Cameron has vowed to achieve several reforms ahead of his proposed referendum, including a crackdown on “benefits tourism” and an exemption for the UK for “ever-closer union”. – (Copyright The Financial Times Ltd 2014)