New analysis drawing on Bank of England company-level data estimates that Brexit reduced the size of the UK economy by around 6%, offering one of the most detailed assessments yet of the trade deal’s lasting economic toll.
The United Kingdom’s decision to leave the European Union cost its economy roughly 6% of its total output, according to analysis based on firm-level data compiled by the Bank of England. The figure points to a significant and lasting drag on British economic activity — one that has accumulated over the years since the UK formally completed its departure from the EU single market and customs union at the start of 2021.
A 6% hit to gross domestic product, the broadest measure of an economy’s size, is a substantial number by any standard. For context, the UK economy contracts by far less than that in a typical recession. A reduction of that scale, spread over several years, would represent slower wage growth, reduced business investment, and diminished government tax revenues compared with what might otherwise have been expected.
Firm-level data — meaning information collected from individual businesses rather than aggregate statistics — is considered a more granular and often more reliable lens through which to assess economic cause and effect. The Bank of England holds extensive data on UK companies through its lending operations and financial stability monitoring, which gives this type of analysis a degree of credibility that broader models sometimes lack.
The economic debate over Brexit’s costs has been contentious since the 2016 referendum. Supporters of leaving the EU argued that the disruption would be temporary and offset by new trade agreements and regulatory freedom. Critics warned of lasting damage to trade flows, investment, and productivity. Years of data have increasingly supported the more cautious view, with UK trade intensity and business investment lagging behind comparable economies.
The Bank of England does not set trade or fiscal policy, but its data and research carry significant weight in shaping the economic policy conversation in Westminster. The findings will likely renew calls for the UK government to reconsider aspects of its trading relationship with the EU, a politically sensitive subject for any British administration. The government has taken steps to improve ties with Brussels, though a return to the single market or customs union remains off the table under current policy.
What remains harder to disentangle is how much of the UK’s weaker growth since 2016 reflects Brexit specifically, versus other global shocks — including the pandemic and the energy price surge triggered by Russia’s invasion of Ukraine. Economists generally attempt to control for these factors using models that compare the UK against countries that faced similar external pressures but did not leave a major trading bloc.
The scale of the estimated loss will keep pressure on policymakers to find ways to rebuild trade and investment links with Europe, even if full re-integration remains politically out of reach.
