Brexit has reduced the size of the UK economy by at least 6%, according to a new analysis based on Bank of England data, with some economists suggesting the long-term impact could be even greater.
Researchers examined a decade of economic data, including decisions made by thousands of British businesses, and compared the UK’s actual performance with estimates of how the economy might have developed had the country remained in the European Union.
The findings point to a significant economic slowdown since the 2016 referendum, with company-level data indicating a 6% loss in growth. When five additional economic modelling methods were used, the average estimated impact rose to around 8%.
Economists said roughly half of the lost growth was caused by uncertainty following the Brexit vote, while the remainder stemmed from increased trade barriers, higher business costs and reduced access to European markets.
Professor Nick Bloom of Stanford University, one of the study’s co-authors, said: “In the case of Brexit, there was a substantial economic impact on the United Kingdom, but it arose gradually over the subsequent decade.”
Bloom added that the UK economy had been growing strongly before the referendum and may have remained closer to the growth rates seen in the United States if voters had chosen to stay in the EU.
Some analysts cautioned that the figures do not fully account for other major global events, including the strong performance of the US technology sector and the energy crisis triggered by Russia’s invasion of Ukraine.
Bank of England Governor Andrew Bailey recently acknowledged that Brexit has had a negative effect on economic activity.
“I think the level of activity and growth in the economy has been lower,” Bailey said.
“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.”
However, he noted that the effect on Britain’s financial services sector had been “nowhere near as detrimental as many people predicted at the time”.
The study includes a disclaimer stating that the conclusions do not necessarily reflect the official position of the Bank of England.
Separate analysis from investment platform AJ Bell highlighted several practical effects Brexit has had on households and businesses.
One of the most immediate consequences was a sharp fall in the value of the pound following the referendum result, marking its largest single-day decline in three decades. The weaker currency increased the cost of overseas travel and imported goods, contributing to higher inflation.
Sarah Coles, head of personal finance at AJ Bell, said Brexit also contributed to labour shortages, rising recruitment costs and weaker economic growth.
Lower growth led to a prolonged period of low interest rates, affecting savers while encouraging many homeowners to take out fixed-rate mortgages.
As those ultra-low mortgage deals have expired in recent years, many households have faced significantly higher repayments, reducing disposable income and putting further pressure on consumer spending.
The latest analysis comes as the Bank of England’s Monetary Policy Committee voted to keep interest rates unchanged at 3.75%, reflecting ongoing concerns about growth and inflation in the UK economy.