Brexit has turned out to be a toxin that is poisoning the British economy. “Huge costs”
COVID-19 has been a gift to Brexit supporters. After years of arguments over the impossible promises of the Vote Leave campaign [za wyjściem Wielkiej Brytanii z UE] the pandemic has finally turned public attention to other issues.
Former Prime Minister Boris Johnson used it to claim that “Brexit helped save lives” – a claim he based on the dubious claim that leaving the EU sped up the vaccine rollout. But perhaps the most lasting benefit for Brexit supporters has been the pandemic's impact on economic statistics. Because by disturbing almost all important data series, made it difficult to assess the effects of Brexit. And these do not fill us with optimism.
Every few months, new research appears pointing to the high costs of Brexit. Supporters of leaving the EU respond that these data are exaggerated because they do not take into account other factors, including the COVID-19 pandemic. And yes, some of these allegations are valid. But focusing on exact numbers misses the broader context. The real problem with Brexit is that it remains a toxin in the economy, creating long-term vulnerabilities ranging from higher energy costs to low investment.
This is what has left the UK stuck on a path of low economic growth.
The trap of mediocrity
The latest skirmish over numbers occurred in November. The US National Bureau of Economic Research (NBER) then published a report which showed that leaving the EU led to a decline in British GDP per capita by 6-8%. This value is much higher than the forecasts made during the referendum campaign in 2016 – the estimates at that time assumed a 4% decline in GDP in the long run. The British public finance watchdog (Office for Budget Responsibility) still considers this figure to be reliable.
In its macroeconomic estimates, the NBER compares the UK with 33 countries, including the US. Their above-average economic performance since the pandemic makes them a difficult benchmark. However, if we exclude the USA, the UK's performance compared to the G7 countries is quite average. Its GDP per person increased by 3.9% in 2016-2024. — less than in France and Italy, but more than in Germany and Canada. This suggests that if the NBER data were correct and Brexit had not occurred, the UK would have seen much stronger growth than France or Germany. Julian Jessop, a pro-Brexit economist, is right to say that this hypothesis is somewhat suspect.
However, it is difficult to deny that Brexit has so far been a source of real economic damage to the UK. The benefits it brought – such as new trade agreements with Australia and India – turned out to be rather insignificant in their eyes. The UK has largely failed to use regulatory freedom to boost economic growth. In three areas of its business, the costs resulting from Brexit were enormous – either they deepened the country's existing weaknesses or weakened its strengths.
The three biggest damages
One of these areas is investments. For decades, the UK has been at the bottom of the G7 for capital spending on areas such as infrastructure and research and development, which has been a major reason for its weak productivity growth. In the years 2011–2016, the country briefly broke out of its bad streak – business investment grew at a rate of 6%. annually.
The Brexit vote ended this recovery — investment remained stable over the next six years. The pandemic has certainly played its part, but two separate forecasts attribute a 10% decline in business investment by 2022. only Brexit. According to them, it was the result of prolonged uncertainty afterwards, which discouraged investors. Although the uncertainty has passed, the impact of Brexit still lingers. Moreover, it has reinforced old habits of British businesses – risk avoidance and short-sightedness – that have long held back their investment.
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The second area is production. The UK's share of global industrial exports has fallen by more than half between 2000 and 2022which resulted from high labor costs, growing foreign competition and crippling energy bills. Before Brexit, Britain's access to a single market of half a billion consumers made up for these disadvantages.
It is no surprise that after this advantage was lost and replaced by a series of non-tariff barriers, exports of goods fell by almost 15%. below pre-pandemic levels. Worse still, this sharp decline affected both exports to the EU and the rest of the world, as higher production costs from the EU deepened the UK's long-standing disadvantages and further weakened the global competitiveness of its producers.
Brexit has not only deepened Britain's weaknesses, but also weakened one of its strengths. The UK is the world's second largest exporter of services after the United States. Bankers, artists and legions of consultants contribute greatly to the development of the service economy.
At first glance, the UK appears to have coped quite well with Brexit in this area: since 2019, services exports have increased by around a quarter in real terms. However, this mainly reflects the global boom. The UK would almost certainly have performed better had it not encountered barriers in its relations with the EU. A study published in June estimated that Due to Brexit, British exports of services fell by 4-5%.
All is not lost
While the Labor government is keen to blame Brexit for the UK's poor economic situation, its impact should not be overestimated. The British economy is not in crisis. Fears that London would lose its status as a global financial center have not come true – it remains the second largest financial center in the world, after New York. The UK's share of global currency and interest rate derivatives trading is actually higher than in 2016. Fears that lower migration from the EU would cause serious economic damage to the UK have also failed to materialize – higher immigration from outside Europe more than compensates for this decline.
However, the costs caused by Brexit should not be ignored. Labor's efforts to repair the damage so far have been small – its May 2025 “reset” deal focused solely on food and energy. It is estimated that in the long run it will increase GDP by only 0.3%. Some Labor MPs are considering re-joining the customs union. Consultancy Frontier Economics estimates that in the long term this could increase UK GDP by more than 2%. Other forecasters, however, are much more cautious. And the Labor Party in its manifesto ruled out joining the customs union.
A more promising solution might be to address the structural problems that Brexit has made worse. The referendum and its aftermath distracted politicians from this task for years. If the government started taking action in this direction – cutting the bureaucracy associated with land-use planning, lowering energy costs for industry – the toxic effects of Brexit could begin to fade.
© The Economist Newspaper Limited, December 30, 2025
