I can speak from experience that it will boost your loss initially, but as your muscles get stronger they demand more energy and if you arent feeding them your body will try to hold onto everything it can.
I am not doing the cambridge diet, but I started on a vlcd and to break through my plateau each time I have had to increase calories despite the same levels of exercise.
It's science all wrong, but it really shouldnt put you off exercising as its the best way to lose and maintain on any diet.