A decade after the UK voted to leave the European Union, new research suggests Brexit has reduced the size of the British economy by around 6%.
The study, which draws on internal Bank of England data from thousands of UK businesses, attempted to estimate how the economy might have performed had the UK remained in the EU. Researchers compared actual economic outcomes with a range of models designed to recreate a “no Brexit” scenario.
According to the findings, roughly half of the economic impact was caused by the uncertainty that followed the 2016 referendum, while the remainder stemmed from increased trade barriers introduced after Britain left the EU single market and customs union in 2021.
The research was led by Professor Nick Bloom of Stanford University alongside economists from the Bank of England. Bloom argued that Britain had been experiencing strong growth before the referendum and may have continued to perform more strongly without the disruption caused by Brexit.
The study concludes that Brexit’s effects were not immediate but accumulated gradually over the years that followed the vote.
“The economic impact on the United Kingdom was substantial, but it emerged progressively over the subsequent decade,” the paper states.
The research comes as senior Bank of England officials have become increasingly open about the economic consequences of Brexit.
Speaking recently, Bank of England Governor Andrew Bailey said Brexit had reduced both economic activity and growth. He argued that shrinking the UK’s access to export markets had inevitably placed downward pressure on growth and productivity.
“If you reduce the size of the markets that we trade with, then that does tend to have a negative impact on growth,” Bailey said.
However, he noted that the impact on Britain’s financial services sector had been less severe than many analysts predicted before the UK left the EU.
Not everyone agrees with the conclusions. Some economists argue that estimating what would have happened without Brexit is inherently difficult. They contend that such studies may exaggerate Brexit’s effects by failing to fully account for other major global events, including the energy crisis that followed Russia’s invasion of Ukraine and the exceptional performance of the US technology sector.
The latest version of the research was published ahead of the 10th anniversary of the Brexit referendum.
While the company-level data indicated a 6% reduction in economic output, five additional economic modelling approaches used by the researchers suggested the overall impact could be closer to 8%.
The study makes extensive use of the Bank of England’s Decision Maker Panel, a survey of businesses that helps policymakers understand economic conditions and inform interest rate decisions. The panel was originally established in 2016 to help assess the impact of Brexit on British firms.
Researchers analysed years of responses from companies, examining how different sectors were affected by Brexit-related uncertainty, trade changes and shifts in business performance.
Although the study was co-authored by Bank of England economists and used the Bank’s data, the paper includes a disclaimer stating that the findings do not necessarily represent the official views of the Bank itself.
The publication comes as Prime Minister Sir Keir Starmer prepares for a summit with EU leaders in July, where discussions are expected to focus on closer cooperation in areas including food exports, farming, electricity markets and emissions trading. Further measures aimed at improving UK-EU economic relations are also expected to be on the agenda.