Key facts
- Estimates on Brexit's economic impact on the UK vary widely, with some projecting significant GDP and productivity losses.
- The U.S. National Bureau of Economic Research (NBER) estimates a 6%-8% GDP reduction by 2025, with lower productivity, employment, and investment.
- The UK Office for Budget Responsibility (OBR) forecasts a 4% long-run productivity reduction and a 15% decrease in EU trade.
- The UK National Institute of Economic and Social Research (NIESR) projects a 5%-6% GDP per capita loss by 2035.
- The Centre for European Reform (CER) estimated a 5.5% GDP loss and 11% investment loss as of mid-2022.
Estimates of Brexit's economic impact on the United Kingdom vary significantly, with different research bodies offering a range of projections for GDP, productivity, investment, and trade.
The U.S. National Bureau of Economic Research (NBER) has estimated that Brexit could reduce UK GDP by 6% to 8% by 2025, with productivity and employment falling by 3% to 4% and investment by 12% to 18%. This is attributed to increased business uncertainty, lower demand, and slower productivity growth due to the management of Brexit and its impact on internationally trading firms. The NBER's methodology involved creating a 'synthetic' counterfactual UK based on several countries, including the United States, Estonia, and Greece.
Julian Jessop of the Institute of Economic Affairs has criticized the NBER's methodology, particularly its heavy weighting of U.S. economic performance and its choice of comparable countries. Jessop argues that UK GDP per capita growth has been similar to that of Germany and France, and that achieving an 8% higher GDP would require the UK to significantly outperform other major European economies. He also suggests that Brexit uncertainty's hit to investment was temporary and that UK employment performance would likely have been similar even if it had remained in the EU.
The UK's Office for Budget Responsibility (OBR) projects that the post-Brexit trading relationship will reduce long-run productivity by 4% compared to remaining in the EU, with two-fifths of this impact occurring before the trade deal took effect. The OBR also estimates that Britain's exports and imports with the EU will be 15% lower in the long run, and that new trade deals with non-EU countries will not materially offset this.
The UK National Institute of Economic and Social Research (NIESR) forecasts a 2% to 3% loss in GDP per capita and labor productivity by 2023, rising to 5% to 6% by 2035. They also predict a 12% to 13% decline in business investment by 2023, decreasing to 7% to 8% by 2035. NIESR's model incorporates reduced trade, increased uncertainty, and lower productivity, noting that higher trading costs lead to fewer high-productivity UK firms exporting and reduced EU competition allows more low-productivity firms to serve the domestic market.
John Springford of the Centre for European Reform estimated in December 2022 that the UK had already experienced a 5.5% loss of GDP and an 11% loss of investment as of June 2022 compared to remaining in the EU, with goods trade down 7% while services trade remained largely unchanged. This smaller economy was estimated to have resulted in around £40 billion ($54 billion) in lost tax revenue.