{"id":652699,"date":"2025-12-24T16:33:59","date_gmt":"2025-12-24T16:33:59","guid":{"rendered":"https:\/\/www.europesays.com\/uk\/652699\/"},"modified":"2025-12-24T16:33:59","modified_gmt":"2025-12-24T16:33:59","slug":"brexits-impact-on-the-uk-economy","status":"publish","type":"post","link":"https:\/\/www.europesays.com\/uk\/652699\/","title":{"rendered":"Brexit\u2019s impact on the UK economy"},"content":{"rendered":"

Nicholas Bloom, Philip Bunn, Paul Mizen, Pawel Smietanka, and Gregory Thwaites argue that there is evidence that Brexit has had a large and persistent negative impact on GDP, output and productivity in their new NBER working paper. You can read the paper in full here<\/a>.\u00a0<\/p>\n

The UK is once again debating why its economy has grown so slowly since the mid\u20112010s. Real wages have barely risen, investment has been weak, and productivity growth has disappointed. Many factors are at play \u2013 from the global financial crisis hangover to the Covid\u201119 pandemic and the energy price shock following Russia\u2019s invasion of Ukraine \u2013 but one candidate has been central to the policy debate for nearly a decade: Brexit.<\/p>\n

A large literature anticipated substantial long\u2011run costs of leaving the EU single market and customs union. Early ex\u2011post work using macroeconomic data also pointed to a sizeable hit to UK GDP and trade. Our contribution is to revisit the question now that almost a decade has passed since the referendum, bringing together \u2018top-down\u2019 macroeconomic data (like GDP and overall levels of employment and productivity) and \u2018bottom up\u2019 microeconomic evidence (on the output and employment of individual firms) in a single framework and comparing actual outcomes to the profession\u2019s pre\u2011referendum forecasts.<\/p>\n

In a new NBER working paper<\/a> (Bloom et al. 2025), we combine data collected through the UK\u2019s Decision Maker Panel (DMP), a survey of firms, with publicly available data to estimate the impact of Brexit. Our three main findings are:<\/p>\n

    \n
  1. Brexit has imposed a large and persistent cost on the UK economy.<\/strong> By 2025, we estimate that UK GDP per capita was 6\u20138% lower than it would have been without Brexit. Investment was 12\u201318% lower, employment 3\u20134% lower, and productivity 3\u20134% lower.<\/li>\n
  2. These losses emerged gradually.<\/strong> The impact was hard to see in 2017\u201318, but accumulated steadily over the subsequent decade as uncertainty persisted, trade barriers rose, and firms diverted resources away from productive activity.<\/li>\n
  3. Economists were roughly right on the magnitude of the impact, but wrong on the timing.<\/strong> The consensus pre\u2011referendum forecast of a 4% long\u2011run GDP loss turned out to be close to the actual loss after five years, but too optimistic about the longer run.<\/li>\n<\/ol>\n

    Measuring Brexit\u2019s macro impact<\/strong><\/p>\n

    Our first approach compares the UK\u2019s post\u20112016 performance with that of similar advanced economies; a similar approach to that used by John Springford in his earlier work<\/a>. We use quarterly data for 33 advanced economies (the EU\u201127, the US, Canada, Japan, Iceland, Norway and Switzerland) from 2006 to 2025, and examine GDP per capita, business investment, employment and labour productivity. Because there is no uniquely \u2018correct\u2019 way to weight the comparator countries, we consider five different approaches: a simple unweighted average, a GDP\u2011weighted average, a gravity\u2011weighted average (GDP divided by distance), a trade\u2011weighted average and a formal synthetic control. Our headline estimates take the simple average across these five methods, which draw similar conclusions irrespective of the weighting scheme, including when no weighting is used.<\/p>\n

    Figure 1 shows UK GDP per head from 2012 to 2025 compared to these five comparator aggregates. Before the referendum, UK GDP per capita grew at broadly the same pace as in the comparison group. After 2016, the lines diverge. By the year to 2025 Q1, UK GDP per head had grown 6\u201310 percentage points less than in comparable economies, and only about 4% in absolute terms over the whole period. Our central estimate \u2013 the average across the five weighting schemes \u2013 is that Brexit reduced UK GDP per head by around 8%.<\/p>\n

    Figure 1: GDP per capita cross-country comparison<\/strong><\/p>\n

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    We see similar patterns for other aggregates:<\/p>\n