UK Brexit legacy underscores long-term costs for trade and growth

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UK Brexit trade & growth legacy

Highlights

Recent estimates indicate the UK economy is 6 to 8 per cent smaller than if it had remained in the EU, matching the UK Treasury’s 2016 forecast.
The fall in sterling post-2016 reduced real incomes, while political uncertainty and higher trade barriers weighed on business investment and economic dynamism.
Post-referendum, UK performance reversed pro-Brexit economists' forecasts of 3 per cent annual growth through 2020 and gains from unilateral free trade.

Ten-year assessment of economic forecasts

As reported by Financial Times, the tenth anniversary of the Brexit referendum is renewing scrutiny of whether economists were right to warn that leaving the EU would damage the UK economy. The article argues that while official short-term predictions of an immediate downturn did not materialise, the broader long-term judgment that Brexit would weaken economic performance has proved accurate.

It says some developments since 2016 have been less straightforward than expected, including the strength of UK services exports. Even so, the fall in sterling reduced real incomes, prolonged political uncertainty during the withdrawal process weighed on business investment, and higher barriers to trade reduced the economy’s dynamism.

The piece adds that the precise counterfactual can never be known, but recent estimates suggest the UK economy is 6 to 8 per cent smaller than it would have been if the country had remained in the EU. That aligns with the UK Treasury’s 2016 estimate of the longer-term damage under a negotiated bilateral arrangement with the EU.

It also contrasts those outcomes with forecasts from pro-Brexit economists, who had expected a rapid improvement in performance, growth close to 3 per cent a year through 2020 and gains from unilateral free trade. Instead, the article says the UK experienced the reverse of the promised post-referendum uplift, with early resilience giving way to weaker momentum.

In our earlier article on the post-Brexit decade and renewed UK-EU cooperation, we discussed how the split has been linked to weaker UK productivity and output, with new trade deals falling short of offsetting the broader costs. We also noted that migration patterns diverged from pre-referendum expectations—EU net migration fell while non-EU inflows rose sharply—adding pressure on public services and border enforcement. Against a more volatile global backdrop, the piece argued that practical steps such as deeper coordination on security, trade frictions, energy and youth mobility could still be pursued even without a near-term return to EU membership.

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