A new analysis marking ten years since the UK voted to leave the European Union concludes that Brexit has left the country's economy roughly 4% smaller than it would otherwise have been. The report, using a synthetic control model that compares the UK to a constructed "doppelganger" economy, also finds employment and prices have been affected.
The study estimates employment is around 2% lower than it would have been, which equates to approximately 685,000 fewer jobs. Consumer prices in the UK are assessed to be about 0.7% higher relative to a scenario in which the country had remained in the EU.
According to the analysis, much of the economic divergence from the comparator emerged after the global pandemic and following the enactment of the UK-EU Trade and Cooperation Agreement in 2021. In the years immediately after the referendum, the report notes that monetary stimulus, a weaker pound, elevated immigration and the build-up of inventories helped mask and delay the full impact of the structural change on growth.
Weak spots identified
Business investment stands out as one of the weakest performing elements over the past decade. The report links depressed corporate spending to ongoing uncertainty about future trading arrangements, which has weighed on investment decisions. Additionally, goods exports to the EU lagged behind many G7 peers as new trade frictions raised costs for exporters.
Those export and investment shortfalls present a contrast with the services side of the economy, which has shown continued expansion according to the report.
Areas of relative strength
- Greater regulatory flexibility post-Brexit.
- An independent trade policy enabling bespoke agreements.
- A stronger standing in artificial intelligence regulation and in financial services.
- Improvements in the current account balance and ongoing growth in services exports.
These gains are cited as meaningful offsets to some of the losses in goods trade and investment, but the report treats them as distinct effects rather than full compensation for the overall economic shortfall.
Looking ahead
On potential remedies, the analysis suggests that targeted changes to the existing UK-EU Trade and Cooperation Agreement could raise UK GDP by between 0.4% and 0.8% without reverting to deeper political integration with the EU. However, the report also cautions that any broader re-engagement or closer economic ties would be politically difficult and would likely require backing from both UK voters and European policymakers.
Overall, the assessment presents a mixed picture: a measurable cumulative cost to output and employment, counterbalanced in part by regulatory and services-related gains, with future improvements hinging on politically sensitive negotiations and targeted trade adjustments.