Since the UK voted to leave the European Union in 2016, debate has raged among economists and politicos over the impact of Brexit on the British economy. This year marks the fifth anniversary of the UK officially leaving the EU, after a protracted exit process, but still, there is little consensus around whether the decision has left the country better or worse off.

In the intervening period the global economy has seen enormous shocks, from the Covid pandemic to the war in Ukraine, so disentangling and observing the impact of Brexit in isolation is no mean feat. However, the evidence we do have suggests the Brexit question is not clear-cut and that it has resulted in both positive and negative impacts on the British economy.

Has Brexit been bad for the UK economy?

In 2023 Bloomberg Economics published a report which estimated that Brexit was costing the British economy £100 billion a year in lost investment and labour shortages. Their analysis, which was conducted by economists Ana Andrade and Dan Hanson showed UK GDP would have been 4 per cent higher at the end of 2022 had it voted to remain in the EU. However, the authors of the study admitted the calculation ‘was not precise’ “Because leaving the EU coincided with the seismic disruptions caused by the coronavirus pandemic.”

The report claimed that the UK was “blighted by shortages of workers” as a result of Brexit. However, even during the period examined by the study – which coincided with the Covid pandemic – the UK continued to receive more migrants than left the country, ONS data shows. After the pandemic, levels of migration into the UK increased to reach record highs with one million more migrants entering net in 2023. The pandemic caused a drop off in migration across the world, with a Wharton study showing migration through legal routes to the US fell sharply after 2019. While Brexit may have caused investors to hold off on the UK in a time of uncertainty, blaming labour shortages on Brexit would appear to be much less credible.

The decision to leave the EU also involved leaving the Common Market, a tariff-free trade zone with half a billion customers. Proponents of Brexit argued Britain could secure a like-for-like deal with the EU after leaving the bloc, and make new agreements with the US, Australia and Japan. The result of Brexit for British trade appears to have been a fall in the export of goods, but a precipitous rise in the export of services. Surprisingly, UK goods exports have fallen largely outside of the EU. In a 2024 report by the UK In A Changing Europe, they found:

“London continues to be a global financial and consulting hub driving services exports. Goods trade, on the other hand, had been declining before Brexit and has since seen a faster downturn. Notably, this decline in goods trade hasn’t predominantly come from the EU, defying most predictions…

“Overall, including services, the EU continues to account for more than 50% of total UK trade. Although the EU’s share of total trade dipped slightly in the first two quarters of 2024, this followed a 15-year high. In Q2 2024, the EU still represented 52.6 per cent of total UK trade. Pre-Brexit, many expected the EU’s share of UK trade to diminish. While this did occur immediately following the implementation of the TCA, the share quickly rebounded and has remained above 50 per cent for over two years.”

IEA Economist Julian Jessop said it was too soon to properly assess the impact of Brexit. Speaking to The Independent in January he said:

“At the aggregate level, it is impossible to separate out the impact of Brexit from other shocks, notably the pandemic and the energy crisis. For what it is worth, my own guess is that the UK economy is now about one per cent smaller than it would otherwise have been.”

The quote is reminiscent of the probably apocryphal tale of Chinese Premier Zhou Enlai, who when asked what he thought of the French Revolution replied it was “too soon to tell.” When monumental shifts in world politics take place, their final consequences are often unforeseen and distant. For that reason, it is good to be sceptical of both those who declare Brexit an unmitigated disaster and those who claim it was an unrivalled success.

How will Brexit impact the UK over the next five years?

The OBR has published its latest forecasts for the UK economy and it says Brexit will put a brake on growth. In its March 2024 outlook, the OBR found:

“Risks to our real GDP forecast remain elevated. As always, the outlook for productivity growth is our most important and uncertain forecast judgment. The effects of subdued investment, the energy price shock and Brexit compound the ongoing weakness seen since the financial crisis…

“We forecast that trade volumes will be subdued in the next few years due to sluggish growth in the UK and global economies, alongside the evolving impact of Brexit. Recent trade data have been volatile and subject to large revisions. However, they remain broadly consistent with our assumption that Brexit will reduce the UK’s trade intensity by 15 per cent in the long term.”

However, the report did admit the difficulties in isolating the impact of Brexit from other major global events, saying: “[I]t remains hard to draw firm conclusions given the challenges of disentangling the simultaneous impacts of Brexit, the pandemic, and other geopolitical developments affecting UK and global trade.”

In a survey of 83 economists from the US and Europe, 86 percent agreed the UK economy would be smaller in 2030 than it would have been if it had not left the European Union. The poll, which was carried out by the London School of Economics, found almost all panellists agreed or were unsure, with only a small number believing the economy would grow as a result of Brexit.

One economist with the LSE told the survey that: “All serious Brexit analysis shows a significant hit to the UK because of higher trade costs with its nearest neighbour.” Peter Neary, an economist at Oxford University who also responded to the poll agreed, commenting: “Leaving the single market and customs unions imposes non-tariff trade barriers that will impact negatively on trade volumes.”

Although it is indeed difficult to pin down the precise negative impacts of Brexit, it is also true there are not many economists who loudly and proudly bang the drum for its successes. It seems unclear whether Brexit benefits have been drowned out by turbulent times and poor governance – or if Brexit only served to compound economic failure.

Has Brexit been good or bad for Britain?

Analyses indicate that Brexit has exerted an observable drag on the UK’s economic performance. For instance, a 2024 analysis by Statista estimates that the UK’s GDP is approximately 3 per cent smaller than it would have been had the country remained in the EU, with projections suggesting this figure could rise to 3.2 per cent by 2025. Similar numbers have been produced by Goldman Sachs and other leading financial institutions.

Trade dynamics have also shifted notably. The London School of Economics reported in December 2024 that the Trade and Cooperation Agreement (TCA) led to a reduction in total goods exports by an estimated £27 billion, or 6.4 per cent, in 2022. This decline has been particularly challenging for small and medium-sized enterprises, which have faced increased bureaucratic hurdles and costs when exporting to EU markets.

Despite these challenges, the UK has sought to capitalize on its newfound autonomy by pursuing trade agreements beyond Europe. Notably, the free trade agreement with Australia is projected to raise the UK’s GDP by 0.1 per cent over 15 years, according to OBR forecasts. However, the projected gains are relatively modest compared to the economic impacts associated with leaving the EU.

Estimates suggest that initial post-Brexit inefficiencies in electricity trading with the EU cost the UK £250 million in 2021, although subsequent cooperation during the 2022 European energy crisis proved beneficial. Proposals for enhanced electricity market arrangements, such as a “multi-region loose volume coupling” system, aim to improve efficiency, though implementation may take time.

Politically, there is a growing impetus to rebuild and strengthen economic ties with the EU. The new UK government, led by Prime Minister Keir Starmer, has expressed a commitment to improving relations with European counterparts. Starmer’s invitation to an EU summit in February 2025 underscores a mutual interest in enhancing cooperation, particularly in trade and economic matters.

Most economists believe Brexit has blown economic headwinds that have tempered growth and complicated trade relationships. The full spectrum of Brexit’s impact will continue to unfold in the coming years, influenced by domestic policy decisions and the evolving global economic environment.