The UK economy has suffered a 6% hit from Brexit, according to a study that used internal Bank of England data on thousands of British companies – analysis that attempts to reconstruct how the country would have grown had it not voted to leave the EU.
The study, conducted by Stanford University’s Nick Bloom and economists at the Bank of England with access to the Bank’s full data, found that about half of the economic damage came from the sheer surprise and uncertainty in the aftermath of the 2016 referendum. The remaining half resulted from rising trade barriers after the UK left the customs union and single market in 2021.
“Brexit cost UK economy 6% in lost growth, Bank of England company data suggests”
“In the case of Brexit, there was a substantial economic impact on the United Kingdom, but it arose gradually over the subsequent decade,” the paper concludes.
Bloom argued that the UK was growing fast before the referendum and could have at least partially kept pace with the US without the disruption. He said the Bank’s company data offered important corroboration.
The findings come as the Bank’s top officials have recently become increasingly candid about Brexit’s economic consequences. Governor Andrew Bailey told journalists: “I think the level of activity and growth in the economy has been lower. And the reason for that is that if you reduce the size of the markets that we trade with, so we reduce our export markets, then that does tend to have a negative impact on growth.” He added that productivity and market size were also affected.
However, Bailey noted that the impact on financial services was “not good” but “nowhere near as detrimental as many people predicted at the time”.
Some critics argue that the study does not fully account for the outperformance of US investment and tech industries or the European energy shock four years ago. Policy economists also contend that modelling how the UK would have grown without Brexit is difficult, and that such studies overstate the impact, especially given the number of global crises.
The latest version of the study has been published just ahead of the 10-year anniversary of the referendum. While the company-level data point to a 6% hit over a decade, wider studies using five more traditional methods suggest an average of 8%.
The paper officially carries a disclaimer that “the views expressed do not necessarily represent those of the Bank of England.”