The UK economy has taken a 6% hit in its potential size over the past decade, courtesy of Brexit, according to an analysis of Bank of England data. This £1.2 trillion reduction in growth represents the estimated economic expansion that would have been achieved had the country remained within the EU. The research, co-authored by British professor Nick Bloom and economists at the Bank of England, provides a detailed understanding of the long-term economic consequences of the 2016 referendum.
The study, which leveraged the Bank's Decision Maker Panel data, revealed that approximately half of the observed impact stems from the initial surprise and prolonged uncertainty following the referendum. The remaining half is attributed to the creation of new trade barriers after the UK formally exited the EU customs union and single market in 2021.
Professor Bloom noted that the UK's economy was growing robustly before Brexit, with a growth rate similar to that of the US. However, the disruption caused by Brexit has resulted in the UK lagging behind its global peers. The researchers used five alternative analytical methods, which collectively suggest an average impact closer to 8%.
The study's findings have been welcomed by Bank officials, who have previously hinted at the economic consequences of Brexit. In a recent statement, Bank Governor Andrew Bailey noted that Brexit has led to a lower level of economic activity and growth, primarily due to a reduction in the size of the UK's export markets.
While some critics argue that the study may not fully account for external factors such as global economic trends, the research provides a significant attempt to quantify the economic cost using granular corporate data. The findings serve as a reminder of the long-term implications of Brexit on the UK economy.