The UK economy has experienced a 6% decline in growth directly linked to the effects of Brexit, according to a new analysis of internal Bank of England data. The study, which examines a decade of corporate decisions and financial results, attributes half of this economic impact to post-referendum uncertainty and the remainder to trade barriers established after 2021.
Did You Know? The Bank of England’s Decision Maker Panel, which provided the data for this study, was specifically established in 2016 to monitor the economic consequences of the Brexit vote.
How the economic impact was measured
Researchers analyzed data normally used by the Bank of England to set interest rates to reconstruct how the UK economy might have performed without the vote to leave the European Union. Co-author Professor Nick Bloom of Stanford University stated that the UK’s pre-Brexit growth trajectory suggested the country could have at least partially kept pace with the US economy if not for the subsequent disruption. While the company-level data indicates a 6% hit, broader analytical methods suggest the impact could be as high as 8%.
Expert Insight: Understanding the long-term trade-offs
Expert Insight: The divergence between the 6% company-level estimate and the 8% wider economic figure highlights the difficulty in isolating Brexit’s effects from global crises. While Bank of England officials, including Governor Andrew Bailey, now openly acknowledge that reduced export markets have negatively impacted growth and productivity, they also note that the actual performance of the financial services sector has been less dire than many initial forecasts predicted.
Challenges to the findings
Some policy economists argue that current models struggle to accurately account for external factors, such as the European energy shock or the rapid growth of the US tech industry. These critics suggest that attributing the entirety of the growth gap to Brexit may overstate the case. The study authors maintain that the corporate data offers essential corroboration for their conclusions, despite a formal disclaimer that the views expressed do not necessarily represent the official position of the Bank of England.
What happens next
Prime Minister Keir Starmer has scheduled a meeting with EU counterparts in July to address potential trade agreements. Discussions are expected to focus on food and farm exports, electricity, and emissions trading. These talks may signal a move toward increased cooperation and regulatory alignment between the UK and the EU.
Frequently Asked Questions
What is the primary cause of the 6% economic hit?
The study attributes half of the impact to the uncertainty following the referendum and the other half to new trade barriers created when the UK left the customs union and single market in 2021.
How does this study differ from previous analyses?
This is the first time researchers have utilized the Bank of England’s proprietary Decision Maker Panel data—which tracks firms’ exposure and financial changes—to isolate the specific economic impact of Brexit on the corporate sector.
What is the official stance of the Bank of England on these findings?
The paper includes a disclaimer stating that the views expressed do not necessarily represent those of the Bank of England, even though the study was co-authored by Bank economists.
How do you believe future trade negotiations with the EU will influence the UK’s long-term economic recovery?
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