Brexit Has Cut UK Economic Output by Around 6%, Study Based on Bank of England Data Finds

The study examined how the economy would have developed if the UK had voted to remain in the European Union, using long-term corporate data that the Bank of England relies on when setting interest rates. Researchers compared actual performance with reconstructed projections of continued EU membership.

According to the findings, roughly half of the economic loss stems from uncertainty following the referendum result, when businesses delayed investment and hiring decisions. The remaining impact is attributed to increased trade barriers introduced after the UK left the EU single market and customs union in 2021.

The analysis has prompted debate among economists, with some arguing that it does not fully reflect external global factors such as the strong performance of the United States’ technology sector or the European energy crisis in recent years, which also affected growth trends.

Professor Nick Bloom of Stanford University, one of the study’s co-authors, said the UK had been growing strongly before the referendum and could have continued to keep pace with other advanced economies without the disruption caused by Brexit. He said Bank of England corporate data provides strong evidence supporting this conclusion.

The paper states that Brexit’s economic impact has been significant but gradual, building over the course of the past decade rather than appearing immediately after the vote.

Bank of England Governor Andrew Bailey has recently acknowledged that Brexit has had a measurable effect on UK growth. He said reduced access to European markets had limited overall economic activity and affected productivity levels, though he noted that the impact on financial services had been less severe than some forecasts had predicted.

Bailey also said that while Brexit had created challenges for trade, its effects were not as damaging to the financial sector as initially expected by some analysts.

Other economists remain cautious about attributing precise figures to Brexit alone, arguing that separating its impact from other global economic shocks is complex. They warn that such estimates may overstate its role in slowing growth.

The study, released ahead of the 10-year anniversary of the referendum, combines Bank of England company survey data with several traditional economic modelling approaches. While firm-level data suggest a 6 percent reduction in output, broader models used in the research indicate an average impact closer to 8 percent.

The research was conducted using the Bank’s Decision Maker Panel, a dataset created in 2016 specifically to monitor Brexit’s economic effects. It collects responses from businesses on investment, trade exposure and financial performance.

Although the Bank of England collaborated on the dataset, the report notes that the views expressed do not necessarily reflect those of the central bank.

The findings come as Prime Minister Keir Starmer prepares for talks with EU leaders in July aimed at improving cooperation on trade, energy and environmental policy, including food exports and emissions trading arrangements.