Brexit has stripped roughly 6 per cent from the size of the UK economy over the past decade, according to economists who have analysed internal Bank of England data covering the decisions, views and financial results of thousands of British firms since the 2016 referendum.
The study drew on the same intelligence the Bank uses to set interest rates, reconstructing how the UK might have grown had it voted to stay in the EU. Its conclusion is that about half the damage came from the sheer shock and uncertainty of the post-referendum years, with the remainder flowing from the higher trade barriers that followed Britain’s exit from the customs union and single market in 2021.
For the small and medium-sized firms that make up the bulk of the UK economy, the finding will feel less like an academic revision and more like a description of the past ten years: thinner margins, postponed investment and the steady accretion of paperwork at the EU border.
The research is co-authored by the British economist Nick Bloom, a professor at Stanford University, alongside economists at the Bank of England. Crucially, it is the first time the Bank’s granular information on the corporate sector has been deployed in this way.
That information comes from the Decision Maker Panel, a survey the Bank set up in 2016 with the express purpose of gauging the economic impact of Brexit. Normally used to help inform interest-rate decisions, it allowed the authors to track, year by year, how exposed individual firms were to different facets of Brexit, the impacts they reported, and the changes that showed up in their accounts.
The company-level data point to a 6 per cent hit over ten years. Set alongside five more traditional methods of analysis, the wider studies suggest a steeper average of around 8 per cent. The full paper, published through the National Bureau of Economic Research, sets out the economic impact of Brexit in detail, and carries the customary disclaimer that “the views expressed do not necessarily represent those of the Bank of England”.
Bloom argues that the UK was growing briskly in the years before the vote and could have at least partly matched the United States but for the disruption. The Bank’s company data, he says, offers important corroboration. His paper concludes that “in the case of Brexit, there was a substantial economic impact on the United Kingdom, but it arose gradually over the subsequent decade”.
The timing is notable. The Bank’s most senior figures have become markedly more forthcoming in recent months about the consequences of leaving the EU, a shift Business Matters has tracked as the governor warned the Brexit impact would stay negative for the foreseeable future.
Speaking to journalists, governor Andrew Bailey said that as a result of Brexit, “I think the level of activity and growth in the economy has been lower.” He went on: “And the reason for that is that if you reduce the size of the markets that we trade with, so we reduce our export markets, then that does tend to have a negative impact on growth,” adding that productivity and the size of the market had also been affected.
Bailey did, however, temper the verdict on the City. The impact on financial services, he said, was “not good”, but “nowhere near as detrimental as many people predicted at the time”.
Not everyone accepts the headline number. Some policy economists contend that it is inherently difficult to model how the UK would have fared without Brexit, and that such studies risk overstating the effect at a time of overlapping global shocks. Critics also argue the analysis does not fully capture the outperformance of US investment and technology, or the European energy crisis that struck four years ago.
The 6 per cent estimate sits within a familiar range. It is a touch above the 5 per cent blow calculated by Goldman Sachs, and it chimes with mounting evidence that smaller exporters have borne the brunt, as seen in the £27bn hit to UK exporters where the smallest firms have been squeezed hardest.
The latest version of the study has landed just ahead of the tenth anniversary of the referendum, and against a backdrop of cautious rapprochement. Prime Minister Sir Keir Starmer has said he will meet his EU counterparts at a summit in July to agree deals on food and farm exports, as well as electricity and emissions trading, with further areas of cooperation and alignment expected to be on the table.
For Britain’s business owners, the political mood music matters less than what it eventually delivers at the border. A decade on from the vote, the lesson buried in the Bank’s own company data is a sobering one: the cost of Brexit did not arrive in a single dramatic shock, but accumulated quietly, firm by firm, year after year.