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Students will only opt to take the exam if they think that doing so will improve their grade. The end result would be grade inflation.

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An update: they're now going with a scheme whereby students get to keep the better of the two grades given by two different methods, with teachers' predictions on the one hand, and the 'standardisation' system on the other.

Presumably this will lead to grade inflation.

https://www.bbc.co.uk/news/uk-53810655

See also Wales seeming being the first to switch to this approach: https://www.bbc.co.uk/news/uk-wales-53807854

Yes, it will lead to grade inflation. The important question is: does that matter? Exams already have their flaws such as being far more likely to give a flawed bad grade to someone than a flawed good grade. How much grade inflation would you see purely from eliminating that effect? And that would largely be desirable.

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