Ten years on, Britain counts the cost of Brexit

By Hanna Ziady, CNN

Ten years ago, Britain chose to abandon its lucrative membership of the world’s largest single market. It has been paying a price ever since.

On June 23, 2016, the Brexit referendum marked the start of the United Kingdom’s drawn-out divorce from the European Union. In a knife-edge vote, 51.9% of Britons opted to leave the EU and 48.1% to remain. The watershed decision triggered a period of political instability and economic upheaval that is still being felt a decade later.

The current leadership uncertainty gripping the ruling Labour Party is arguably just the latest iteration of the turmoil that Brexit inserted into the heart of British politics. It has been no good for the economy, either.

To be sure, some of the worst-case predictions did not materialize, such as an immediate recession or a housing market crash. Yet economists broadly agree that leaving the EU has weighed on the UK’s economic growth potential – with estimates ranging from 2% to as much as 8% of foregone output. The broad range highlights how difficult it is to isolate Brexit’s impact on the economy given the shocks that followed, including the pandemic and Ukraine war-related energy crisis.

But it is difficult to argue that it has been anything other than damaging, hurting business investment, lowering productivity and dragging down living standards.

“Brexit is a constant drag on the economy,” said Michael Saunders, a senior adviser at consultancy Oxford Economics and a former Bank of England official. It “continues to reduce the level of gross domestic product compared to what it would otherwise be,” diminishing government revenue and prompting tax hikes and spending cuts, he told CNN.

Even Julian Jessop, a Leave-supporting independent economist, accepts that the “initial impact” of leaving the EU has “clearly been negative.” He argues, however, that the costs have been “smaller than feared” and are likely to “fade over time.”

No better off

If the precise costs of Brexit are difficult to quantify, the promised benefits – from less regulation and reduced rates of immigration to better-funded public services and major new trading relationships – are even less clear.

New trade deals with countries such as Australia, New Zealand, India and Japan are trivial when compared with UK-EU trade, worth £856 billion ($1.1 billion) last year, official figures show.

On at least one measure, lowering immigration, Brexit has failed spectacularly. Net migration to the UK has averaged 550,000 a year since 2021, when the post-Brexit immigration system came into force, compared to 250,000 in the 2010s, according to the Migration Observatory at the University of Oxford. In 2023, net migration was just under 950,000, an all-time high, as immigration by non-EU citizens spiked before dropping sharply with the introduction of new policies.

Perhaps unsurprisingly, six in 10 Brits think Brexit has been a failure, according to a YouGov poll published earlier this month.

Geraint, a software developer from the West Midlands region of England, who only gave his first name, told CNN he had voted in favor of Brexit over concerns about rising immigration, which he felt was putting pressure on healthcare and other public services.

Given a second chance, however, he would “100%” vote to remain in the EU, he said, largely for better job prospects.

“We were promised as a country we’d be better off (outside the EU) and I just don’t feel as if that’s been true and therefore opportunities outside of Britain are quite appealing to me and now I feel trapped,” he said, noting that his wife had voted in favor of Remain in 2016.

Businesses count the cost

Decisive though it was, the 2016 referendum on leaving the EU was in fact just the start of a painful process. Years of uncertainty followed, as Britain and the European Union wrangled over what their future trading relationship would look like.

It wasn’t until January 2020 that the UK formally withdrew from the EU, signing a trade deal only at the end of that year. That’s when the real headache for businesses began, as customs checks, border controls and reams of paperwork came into force.

Before Brexit, the UK was part of the EU customs union and single market, allowing for the free movement of goods, people and capital.

In practice, that meant that a farmer in southeast England could ship a truckload of potatoes to Paris just as easily as he might send it to London.

Since formally leaving the EU, those same potatoes must now pass customs checks and health inspections before being allowed to even cross the border into France.

“Firms have adapted, but it makes things more complicated,” said Ben Fletcher, CEO of Logistics UK, whose members move goods by road, rail, sea and air. “It’s driven up costs and made it harder to sell into what is still our biggest market,” he told CNN.

Bosch, the German engineering firm, says its British subsidiary now handles 10,000 import transactions per year, a stunning increase from just 40 annually prior to Brexit. “Nearly a dozen Bosch employees are now working in a dedicated department handling this administrative workload,” said Steffen Hoffmann, Bosch UK’s managing director.

Bosch has carried on regardless, and still views the UK as an attractive place to do business. But the effect on small businesses has been chilling, with thousands simply halting trade with the EU altogether, and still more considering it.

Annual surveys by the British Chambers of Commerce since 2021 consistently show that most companies think the UK-EU trade deal is not helping them grow sales. “It’s an ongoing, gnawing issue that is holding back trade,” said William Bain, head of trade policy at the chambers.

That shows up clearly in the data, with UK goods exports tumbling relative to other major economies since 2016. Worryingly, the decline extends beyond the EU, which could suggest that “Brexit has played a role in discouraging UK trade in goods in general,” according to Paul Dales, chief UK economist at consultancy Capital Economics.

London still shines

While UK trade in goods has suffered since Brexit, services exports continue to grow. Britain is the world’s second-largest exporter of services, after only the United States, and the world’s top net exporter of financial services.

That matters, given that financial and related professional services combined accounted for 11% of economic output last year and employed 2.5 million people, with two thirds of those jobs based outside London, according to TheCityUK, an industry lobby group.

Fears that the City of London would lose its finance crown to other European capitals proved overblown. The UK remains Europe’s top destination for foreign direct investment into financial services. Between 2015 and 2025, the UK attracted 949 FDI projects, more than France and Germany combined, according to EY, a professional services firm.

“I don’t think we have seen any overall decline in the UK as a financial services center,” said Andrew Pilgrim, a partner at EY. “Overall, we’re left with London and the UK very much the global financial center in this region of the world.”

Rejoining EU off the table

Notwithstanding its economy’s strengths, Britain won’t easily replace what it has lost by forfeiting unfettered access to a market of almost half a billion consumers.

Yet despite the drag on its economy, few UK business leaders or politicians advocate for reversing Brexit and rejoining the European Union, at least in part because the whole issue remains so politically divisive.

Rejoining would also generate yet more uncertainty for companies which are only just adapting to the new trading relationship, said Sean McGuire, a director at the Confederation of British Industry, a business lobby group.

Rejoining is “not the debate of today,” he told CNN.

The UK and EU have forged closer ties, including on security and defense, since the Labour Party came to power in 2024 and Prime Minister Keir Starmer promised a “reset” of the relationship. And there is hope for future deals in other areas, such as on food products.

But there is plenty of skepticism about whether these will meaningfully boost economic growth. And regaining EU market access would require the UK to sacrifice some autonomy to set its own rules, a key Brexit issue.

Jessop, the Leave-supporting economist, believes the UK should make better use of its freedom from EU rules to cut red tape and lower trade barriers with the rest of the world.

“Time spent getting closer to the EU is time wasted not tackling problems related to the UK economy,” he added, pointing to what he considers restrictive planning rules that impede building and over-regulation of the labor market.

Even so, Britain can ill afford to ignore the giant economy on its doorstep.

“It’s important to recognize that the world has changed dramatically since the referendum,” McGuire said.

“We’re living through a new global order on trade: an unpredictable United States, a more aggressive China, the rise of India… It makes sense that the UK tries to improve the trading relationship with its closest trading partner, and its biggest.”

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