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Brexit

Brexit's Lasting Impact: A Decade Since the Referendum

Strategic Insights

— 2 min read

The UK's decision to leave the EU on January 31, 2020, has had far-reaching consequences, with Brexit blamed for the country's weak economic growth. As the UK prepares to mark the tenth anniversary of the referendum, the effects of Brexit on trade, productivity, and inflation continue to be felt. The Office for Budget Responsibility (OBR) has warned that Brexit will reduce the UK's productivity potential by 4 per cent and result in a 15 per cent drop in trade intensity.

Key Takeaways:

  • The UK's real gross domestic product (GDP) per capita has risen by 4.4 per cent between 2016 and 2024, less than half the eurozone's 9 per cent increase.
  • Brexit has resulted in a 15 per cent drop in trade intensity, with exports and imports as a percentage of gross domestic product.
  • Economists agree that the UK's productivity slowdown began during or immediately after the global financial crisis, not in the referendum year of 2016.
  • The UK's export performance since 2019 has been much weaker than that of other G7 countries, with exports of goods and services in volume terms lower in the second quarter of this year than in the final pre-Brexit quarter of 2019.
  • Services exporters now face higher trading costs, more red tape, and fewer opportunities due to Brexit barriers.
  • The latest inflation figure of 3.8 per cent compares with 2.2 per cent in the eurozone, with UK food price inflation at 4.5 per cent.
  • The OBR's medium-term productivity projections suggest that Brexit will have a lasting impact on the UK's economy.
  • The Bank of England governor, Andrew Bailey, has stated that Brexit will have a negative impact on economic growth for the foreseeable future.
  • The Reform UK party, which campaigned against Brexit, is not concerned with the OBR's medium-term productivity projections.

Statistics:

  • UK real GDP per capita rose by 4.4 per cent between 2016 and 2024.
  • Eurozone real GDP per capita increased by 9 per cent between 2016 and 2024.
  • Italy's real GDP per capita rose by 11 per cent between 2016 and 2024.
  • UK real GDP per capita increased by 0.8 per cent in the second quarter of this year compared with the pre-Brexit final quarter of 2019.
  • Eurozone real GDP per capita increased by 3.3 per cent between 2019 and 2024.
  • UK food price inflation is 4.5 per cent.
  • Eurozone food price inflation is 3 per cent.
  • The OBR's medium-term productivity projections suggest that Brexit will reduce the UK's productivity potential by 4 per cent.

Sources:

  • The Sunday Times
  • Office for Budget Responsibility (OBR)
  • Bank of England
  • London School of Economics
  • Reform UK party
  • Eurostat

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