Ten years later, Brexit’s economic effects are becoming easier to see

Not long after the UK departed the EU in 2020, a Bristol-based company named Eskimo began selling a new type of high-fashion, energy-efficient electric radiator built on technology developed by academics in the city.

The plan was to ship them across Europe through the Channel Tunnel.

It was a well-timed product for Europe’s green goals, and with orders coming in, the Birmingham factory was kept busy.

Company boss Phil Ward says his start-up has kept growing, but in his view it could have grown far more without what he calls “the Long Brexit effect”: in 2020, 40% of his exports went to the European Union, and by 2025 that figure had fallen to just 5%.

The post-Brexit agreement struck with the EU by then-Prime Minister Boris Johnson in December 2020 guaranteed zero tariffs on exports to the EU, but Ward says that even so, red tape and paperwork unrelated to tariffs were enough to cause delays, extra costs and an expectation of hassle for potential customers.

Eskimo did manage to export some products to agents in France, but it stopped selling directly to European consumers altogether. A planned expansion into Germany failed.

And as Eskimo found when it tried to look at other markets, such as exporting towel rails to Australia and New Zealand, there was no special advantage because both countries follow international safety standards.

That matters because one theoretical Brexit gain was the idea that UK regulators could stop following EU safety rules and adopt a more pro-innovation, less regulatory approach for high-tech inventions.

Eskimo’s experience is one example of a wider pattern shown in export data. The UK Trade Policy Observatory at Sussex University calculated a sharp 26% fall in the different types of UK exports by 2023, while a new study from Aston University Business School using five years of more detailed trade data concludes there was a 53.8% loss in the type of exports and 31.5% for imports.

These “trade varieties” figures measure declines in the number of products sent to different EU countries.

A decade ago, many economists argued that leaving the EU would cause lasting economic harm to the UK, and many now believe that harm has indeed happened.

But making that judgment requires comparing what actually happened with what might have happened without Brexit, and that depends on method and statistical judgment.

That judgment also has to take into account that the years since Brexit have been marked by major global upheaval. The pandemic that began in spring 2020, the war in Ukraine that started two years later and, more recently, the energy price shock triggered by the conflict in Iran all have to be considered.

So does the question of whether a Brexit-free UK would really have matched the Silicon Valley tech boom in recent years to the same extent as Brexit Britain.

The broad consensus among economists doing the calculations is that they have accounted for global turmoil when measuring Brexit’s impact. Others dispute their methods and the scale of the effect.

Some of the bleakest forecasts from 2016, including claims that the UK could suffer a Great Depression-style blow, turned out to be too pessimistic. Any economic damage was not immediate enough to trigger a sudden recession.

But those who think the UK did suffer long-term economic harm from leaving the EU say the damage was no less serious.

Many economists argued the UK would sustain longer-term economic damage by leaving the EU

“Among economists there is not much debate, but there still is among policy folks. The experts were right. It was, if anything, worse than we thought, but it’s taken longer to get there,” says Nick Bloom, a British Stanford University professor and author of one of the most prominent recent major studies using Bank of England data.

His research is among dozens of academic economics papers that have examined huge amounts of data to assess Brexit’s effect on the UK economy.

UK trade with Europe had been rising before 2016. But official figures show that compared with 2019, UK exports to the EU in 2025 were down 14% and imports were down 10%.

And the trend has worsened. Last year, 2025, was the worst year this century for UK goods export volumes to the EU, apart from one year during the depths of the financial crisis.

Think tank Niesr estimates exports were 16.9% lower and imports 16.1% lower than would have been expected based on the positive trend before 2016. The Centre for European Reform uses a different method, trying to account for what might have happened if the UK had not been left out of a more recent rise in intra-EU trade, and arrives at a goods trade hit of 16% for exports and 14% for imports. The figures are broadly similar, and other research from European countries points to comparable drops in their trade with the UK. Again, these calculations depend on choosing a method and making statistical judgments.

Most studies reach similar conclusions, but if you look only at raw trade figures and do not adjust for major inflation spikes, there is a 4% rise in cash terms since 2019 in UK goods exports to the EU, which some analysts have cited to argue the impact has been minimal.

One area that has done better since 2016 is services, which account for more than 80% of total UK economic output. UK services exports to the EU are up 57% over the past decade, driven by a category including accountancy, legal services and consultancy. Services exports to non-EU countries are up 49%. Imports from the EU are up 35% over the same period, and imports from outside the EU are up 60%.

It is also true that services have boomed across the advanced world, and some argue Britain might have done even better without Brexit. Either way, financial services were clearly in better shape than the worst predictions made during the referendum campaign.

Business investment was significantly lower than it might have been after Brexit, according to two studies. Former Bank of England independent economist Jonathan Haskel estimates a £29bn, or 1.3%, reduction in the size of the economy from lower investment than would have been expected since 2016.

Business investment flattened in real terms immediately after 2016 and notably underperformed various measures of UK long-term trends and comparisons with other countries. Professor Haskel’s latest estimate is a shortfall of 13% against the pre-referendum trend from 1997-2016.

Using different methods, the National Institute of Economic and Social Research and the leading US economic research body the NBER find that UK business investment is down 12-13% compared with where it would have been, relative to a representative basket of advanced economies.

Much of this research predates the 2022 energy shock and attributes the damage to uncertainty in the early years after Brexit. The latest analyses show the UK still behind most of the G7, though it has overtaken Germany after the hit to Germany’s economy from the 2022 energy crisis.

The most visible sign of economic shock was the fall in the pound in the minutes and then years after the referendum. That made imports and travel more expensive and reduced the value of UK assets in global terms.

Before the referendum, the pound had reached new highs against major currencies. It then dropped sharply after the vote and has since traded lower, especially against the dollar and the euro. It fell further at several points during post-Brexit uncertainty and again during the mini-budget in 2022 when Liz Truss was prime minister. Since then, sterling has broadly strengthened, benefiting from a weaker dollar, and is now near the top of its post-Brexit range.

A weaker pound has pushed up prices for imported goods, from fresh food to manufactured products. But it has also helped exporters by making their goods cheaper in overseas markets. In turn, some food prices have been helped slightly by lower tariffs on imports from abroad that are not produced in the UK.

One possible Brexit benefit was the UK’s ability to strike its own trade deals outside the EU. The UK-India deal stands out as an example of the UK breaking new ground well beyond what might have happened inside the EU.

The UK also signed the first “deal” to soften the impact of President Trump’s tariffs. The Government itself says the trade deals Britain has signed will only modestly lift economic growth, by fractions of a percentage point over decades.

It is also worth noting that even former Prime Minister Tony Blair, an outspoken Remainer who had previously backed a second referendum, recently said the UK had gained some benefit from being able to set its own AI regulations and that this would matter for any future attempt to rejoin the EU or the single market.

We are now a decade on from the referendum and six years outside the EU and its economic structures

But the picture is not entirely one-sided. The EU has signed a deal with South America, the Mercosur deal, which when fully implemented will give EU car exporters access to Brazil, the world’s sixth-largest market, at zero tariffs, compared with the current 35% for the UK.

And while Britain also secured the first and best deal to ease President Trump’s tariffs, the EU has since gained many of the same advantages. The rate at 10% is better for the UK than the EU’s 15%, but there is no quota for EU car exports to the US, while the UK has a quota of 100,000.

It may be that the quiet rivalry between London and Brussels sparked by Brexit has encouraged dealmaking that might otherwise have taken years.

There is one place as central to the UK’s relationship with the EU as the Strait of Hormuz is to global energy markets: the Channel Tunnel. When Britain was in the EU, the tunnel was the living symbol of frictionless goods trade.

In 2016, 1.64m trucks passed through the tunnel. Last year, after Brexit, the figure was 1.16m. That means almost half a million lorry journeys are missing each year — nearly 30% of this economically vital, high-value cross-Channel traffic has been lost.

Exactly how many trucks there would have been without Brexit is impossible to know, but the impact of the pandemic, for example, would have faded by now.

One industry participant calls the pattern “pure Brexit”, with small exporters leaving because they could not afford to invest in systems and surviving business models shifting from “just in time” to greater stock-holding. HMRC trade data analysed by the LSE also pointed to 16,400 firms — 14% of EU exporters — stopping exports to the EU altogether between 2019 and 2023, with the decline concentrated among smaller firms.

What has happened in the Channel Tunnel matches the academic consensus that the UK economy is now smaller than it would have been based on the path it was on in 2016.

The estimates range from about 3% to 8%. “The fact that it is harder to trade with the EU is about half the hit, in line with previous forecasts,” says Nick Bloom, lead author of the NBER research.

He says the rest comes from the effects of what at times felt like near-nightly political meltdown during the Brexit negotiations. “The other half is the uncertainty from the fact the Brexit process itself was such an enormous mess… We can never get that second 4% back.”

These estimates are based on modelling how a UK still inside the EU might have performed economically if it had still faced the pandemic and the 2022 energy shock but not Brexit.

The latest NBER study also takes population growth into account and says the UK lost 6-8% of per capita output.

Bloom says he has used several approaches, including accounting for distance, economic gravity, the size of the economy and selectively excluding possible outliers.

There are, however, other figures. The authors, including Bank of England economists, also used a special survey of thousands of firms, covering a tenth of private employment, created by the Bank in 2016 to track reactions to Brexit. The first Brexit analysis based on this survey was published only this year and updated on Friday, showing how prolonged Brexit uncertainty affected business decision-making.

This completely different firm-level method also points to an economy about 6% smaller than it would have been without Brexit. That implies an economy that would otherwise have grown about two-thirds of a percentage point faster each year over the past decade.

The world that post-Brexit Britain entered in 2016 has changed beyond recognition.

Back in 2016, Brexiteers talked up the chances of a free trade deal with the US, but the reality in 2026 is a US that has raised trade barriers and weaponised tariffs. A decade ago, some suggested the EU could collapse — it has not, and has introduced protections for its manufacturers. China is also now increasingly assertive.

The questions these changes raise about the UK’s global economic strategy are almost entirely different from those asked a decade ago.

An economically independent UK may be well placed to handle this volatile world. It is also possible that the opposite is true and that UK exporters would benefit from rejoining the EU single market.

Brexit, and its effects on the economy, are still very much with us

What the data makes clear is that many UK goods exporters, especially smaller ones, have not adapted to Brexit and that in some sectors things are not improving.

Should the UK align itself with the US and its preference for lightly regulated tech, especially AI? Can a closer UK-EU relationship be reconciled with that? The EU has responded to the new economic nationalism with “Made in Europe” legislation that may require a certain share of parts to be made in Europe — it is unclear whether the UK is included. An early test will come with steel next month, and then with a deal to avoid UK-EU electric car tariffs at the end of the year.

UK officials recently suggested creating a single market for goods trade with the EU as part of the next stage of a Brexit reset, but the EU says that is incompatible with the government’s current red lines on freedom of movement.

Unions have moved from wanting to rejoin the customs union to seeking a Swiss-style deal in the European Economic Area.

In recent weeks, government ministers have quietly begun saying that these red lines apply only to this Parliament and will be reconsidered. What path Sir Keir Starmer’s replacement as prime minister chooses, we do not yet know.

Next month’s UK-EU summit has now been postponed. Sir Keir had wanted to secure a deal to roll back many of the post-Brexit frictions on food and farm trade that have affected cross-Channel trade flows. Other political parties have promised to tear up the government’s EU reset or even try to reverse parts of the post-Brexit deal.

Put bluntly, the status quo will not last. Ten years on, Brexit, and its effects on the economy, are still very much with us, and the policy debates may soon return.