Brexit's Economic Impact: A Decade On, The Picture Becomes Clearer

UKPulse Money Desk

Ten years after the UK's decision to leave the EU, economists are increasingly converging on the view that Brexit has had a discernible negative economic impact. Despite initial predictions of immediate downturns proving overly pessimistic, the long-term effects on trade and business are now becoming more apparent.

UK exports to the EU have seen a significant reduction in 'trade varieties' – the number of different products sent to EU countries.
Businesses report increased red tape and costs, even with zero tariffs, impacting direct sales to European consumers.
Economists largely agree on Brexit's negative economic impact, even after accounting for global events like the pandemic and the Ukraine war.
Initial fears of a 'Great Depression-style' hit were unfounded, but the long-term damage is considered no less profound by many experts.

A decade after Britain voted to leave the EU, a stark picture is emerging of the economic consequences of Brexit. The numbers are becoming harder to ignore: since 2016, the UK's trade with Europe has contracted by £100 billion annually, equivalent to a 12% reduction in total exports. This downturn can be attributed to multiple factors, including an increase in regulatory hurdles and the introduction of new customs procedures.

Eskimo, a Bristol-based manufacturer of high-fashion electric radiators, is one company that has felt the full force of these changes. Despite securing a zero-tariff agreement with the EU, the firm's exports to Europe have plummeted from 40% in 2020 to just 5% by 2025. Phil Ward, Eskimo's founder, attributes this decline to what he terms 'the Long Brexit effect' – increased bureaucracy and paperwork that has deterred customers from purchasing British goods.

These trends are not unique to Eskimo; national trade data shows a broader pattern of decline in the diversity of UK exports. Research by the UK Trade Policy Observatory at Sussex University reveals a 26% reduction in export varieties, while Aston University Business School's analysis indicates an even more significant loss of 53.8% and 31.5% for imports and exports respectively. These figures underscore the narrowing scope of UK trade with its closest neighbours.

One challenge in assessing Brexit's impact lies in disentangling it from other global events, including the pandemic and conflict in Ukraine. However, economists conducting these analyses argue that they have factored in this turmoil. Nick Bloom, a professor at Stanford University, observes, "Among economists there is not much debate... The experts were right. It was worse than we thought, but it's taken longer to get there."

Academic research has collectively analysed vast datasets, providing mounting evidence of Brexit's sustained economic impact on trade flows and business operations with the EU. While some predicted an immediate sharp downturn akin to a 'Great Depression', the accumulation of data suggests that the true extent of this crisis lies in its slow-burning effects.

Source: Phil Ward (Eskimo), UK Trade Policy Observatory (Sussex University), Aston University Business School, Nick Bloom (Stanford University)

Why this matters: Understanding the long-term economic effects of Brexit is crucial for future policy decisions and for businesses operating within or intending to trade with the EU. It sheds light on the challenges faced by UK exporters and the evolving landscape of international trade.

What this means for you: What this means for you: This ongoing economic impact can influence everything from the availability and cost of goods in the UK to job opportunities in export-oriented sectors. It also affects the overall economic health and growth prospects of the country, potentially impacting wages and living standards.

Brexit's Economic Impact: A Decade On, The Picture Becomes Clearer

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