Study Shows Brexit Hit UK Economy Harder Than Expected
The paper — authored by five economists, including a contributor from the Bank of England — evaluates “almost a decade’s worth of data” to measure the long-term effects of the 2016 decision to exit the European Union.
The authors note that the Brexit process, triggered when the Leave campaign won the June 2016 referendum “by 51.9% to 48.1%,” extended for years because of its scale and complexity. Although the legal departure took place in January 2020, the transition period ran through the end of that year, with “negotiations on Northern Ireland stretching into 2023.”
According to the report, “it was not until 2024 that the Brexit process was close to completion,” requiring the researchers to draw on nearly a decade of data.
Their analysis points to substantial economic losses. The study estimates that “by 2025, the Brexit process had reduced UK GDP by 6% to 8%, investment by 12% to 18%, employment by 3% to 4%, and productivity by 3% to 4%.” The economists emphasize that these impacts “accumulated gradually over time.”
The report outlines four key mechanisms behind the slowdown. Brexit created “a persistent increase in uncertainty, weighing on investment, in particular,” while firms braced for “lower expected demand for goods and services.” Innovation initiatives and IT spending also weakened as management teams shifted attention to Brexit planning. Additionally, “the more productive, internationally exposed firms were more negatively impacted,” diminishing productivity gains across sectors.
To isolate the effect of the referendum, the authors stress that the outcome had been considered unlikely — betting markets put the probability of a Leave victory at “around 30% in the months before the vote.” The team used this surprise as a “discrete event” to build macro- and micro-level models.
On the macro side, the UK’s post-2016 trajectory is compared with up to 33 peer economies. The method “matches UK performance to these countries in a 10-year pre-referendum control period and then simulates the next 10 years after the referendum to forecast” how the economy might have evolved without Brexit.
The report concludes that the economic damage has been broader and more enduring than many anticipated when Britons headed to the polls nearly a decade ago.
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