Economic effects of Brexit
The economic effects of Brexit were a major area of debate during and after the referendum on UK membership of the European Union. The majority of economists believe that Brexit has harmed the UK's economy and reduced its real per capita income in the long term, and the referendum itself damaged the economy. It is likely to produce a large decline in immigration from countries in the Eu
Overview
The economic effects of Brexit were a major area of debate during and after the referendum on UK membership of the European Union. The majority of economists believe that Brexit has harmed the UK's economy and reduced its real per capita income in the long term, and the referendum itself damaged the economy. It is likely to produce a large decline in immigration from countries in the European Economic Area (EEA) to the UK, and poses challenges for British higher education and academic research.
Immediate impact of the referendum
According to one study, the referendum result had pushed up UK inflation by 1.7 percentage points in 2017, leading to an annual cost of £404 for the average British household. Studies published in 2018 estimated that the economic costs of the Brexit vote were 2% of GDP, or 2.5% of GDP. According to a December 2017 Financial Times analysis, the Brexit referendum results had reduced national British income by 0.6% and 1.3%. A 2018 analysis by Stanford University and Nottingham University economists estimated that uncertainty around Brexit reduced investment by businesses by approximately 6 percentage points and caused an employment reduction by 1.5 percentage points. A number of studies found that Brexit-induced uncertainty about the UK's future trade policy reduced British international trade from June 2016 onwards. A 2019 analysis found that British firms substantially increased offshoring to the European Union after the Brexit referendum, whereas European firms reduced new investments in the UK. Short-term macroeconomic forecasts by the Bank of England and other banks of what would happen immediately after the Brexit referendum were too pessimistic. The assessments assumed that the referendum results would create greater uncertainty in markets and reduce consumer confidence more than it did. A number of economists noted that short-term macroeconomic forecasts are generally considered unreliable, as they are something that academic economists do not do, but rather banks do. Economists have compared short-term economic forecasts to weather forecasts whereas the long-term economic forecasts are akin to climate forecasts: the methodologies used in long-term forecasts are "well-established and robust".
Immediate impact of the end of the transition period
At the end of transition period, a trade agreement was enacted between the EU and the UK. Its implementation was rife with bureaucracy and uncertainty.
Long-term impact on the UK economy
Many economists believe that leaving the European Union would adversely affect the British economy in the medium- and long-term. Surveys of economists in 2016 showed overwhelming agreement that Brexit would likely reduce the UK's real per-capita income level. Surveys in 2017 and 2019 of existing academic research found that the credible estimates ranged between GDP losses of 1.2–4.5% for the UK, and a cost of between 1 and 10% of the UK's income per capita. These estimates varied depending on whether the UK left via a 'hard' or 'soft' Brexit. In January 2018, the UK government's own Brexit analysis was leaked; it showed that UK economic growth would be stunted by 2–8% for at least 15 years following Brexit, depending on the leave scenario. However, the doppelganger model much of this analysis has been based on has been challenged, as being fundamentally flawed. It has been suggested the model better tracks the impact of the Conservative-Liberal Democrat coalition government's austerity programme and its long term impacts than Brexit. According to most economists, EU membership has a strong, positive effect on trade and, as a result, the UK's trade would be worse off when it left the EU. According to a study by University of Cambridge economists, under a hard Brexit, whereby the UK reverts to WTO rules, one-third of UK exports to the EU would be tariff-free, one-quarter would face high trade barriers and other exports risk tariffs in the range of 1–10%. A 2017 study found that "almost all UK regions are systematically more vulnerable to Brexit than regions in any other country." A 2017 study examining the economic impact of Brexit-induced reductions in migration found that there would likely be "a significant negative impact on UK GDP per capita (and GDP), with marginal positive impacts on wages in the low-skill service sector." It is unclear how changes in trade and foreign investment will interact with immigration, but these changes are likely to be important. In October 2021, the UK government's Office of Budget Responsibility calculated that Brexit would cost 4% of GDP per annum over the long term. a 4% GDP hit could translate into a £32 billion cost per annum to the UK taxpayer. After rebates, the UK's EU membership fee in 2018 was £13.2 billion. CIPS has reported think tank Campaign for European Reform's research, which found that UK goods trade was 11.2%, or £8.5 billion, lower in September 2021 than it would have been according to the Office for Budget Responsibility's forecast in March 2016. A 2022 study from research firm Resolution Foundation found that Brexit had reduced the openness and competitiveness of the British economy. On January 11, 2024, the London Mayor's Office released the "Mayor highlights Brexit damage to London economy". The release cites the independent report by Cambridge Econometrics that London has almost 300,000 fewer jobs, and nationwide two million fewer jobs as a direct consequence of Brexit. Brexit is recognized as a key contributor to the 2023 cost-of-living crisis with the average citizen being nearly £2,000 worse off, and the average Londoner nearly £3,400 worse off, in 2023 as a result of Brexit. In addition, UK real Gross Value Added was approximately £140bn less in 2023 than it would have been had the UK remained in the Single Market. Economists and analysts at Cambridge Econometrics found that, by 2035, the UK is anticipated to have three million fewer jobs, 32% lower investment, 5% lower exports and 16% lower imports, than it would have had been. The report states that the UK will be £311bn worse off by 2035 due to leaving the EU. A 2024 study by Alabrese et al finds that the vast majority of UK regions experienced significant output losses as a result of Brexit, estimated at 5–10 percentage points of GDP relative to synthetic counterfactuals. The paper concludes that while Brexit reduced regional inequalities, it did so by “levelling up through levelling down,” meaning that previously more prosperous regions, such as London and the Midlands, were disproportionately hit, resulting in a poorer UK overall. Based on 2025/2026 Bloomberg Economics research, Brexit has caused a significant, persistent, and worsening drag on the UK economy, costing an estimated £100 billion to over £200 billion annually. For instance, a 2025 working paper estimated that by 2025 Brexit had reduced UK GDP by 6% to 8%, using macro data and micro estimates from the Decision Maker Panel survey.Bloom, Nicholas; Dhingra, Swati; Van Reenen, John (April 2024). "The Economic Impact of Brexit". NBER Working Paper Series. 32345. Retrieved 23 October 2025. This estimate was cited in an October 2025 Bank of England speech, which also noted declines in investment, employment, and productivity due to the Brexit process.Dhingra, Swati (October 2025). Tariffed with the same brush: confronting today’s challenges to trade (Speech). Bank of England. Retrieved 23 October 2025. Overall, recent studies suggest the long-term, per-person damage to GDP is roughly 6% to 8%, roughly double the 4% hit initially estimated by the Office for Budget Responsibility.
The "divorce bill"
Since fiscal impacts will play a major role in the outcome of Brexit, former prime minister Theresa May stated that money would be taking first place as the key importance surrounding Brexit, the others being borders and laws. The Brexit divorce bill was essentially a financial settlement in which the United Kingdom must pay off their liabilities to the EU. This includes, for example, unpaid contributions to the EU's multi-year finances. There is no current set figure for the bill but estimates have shown it to be at least £39 billion. First year costs (2018–2019) were expected to be close to £14 billion and decreasing to £7 billion by 2022–2023.
Movement of companies
Following the Brexit referendum, many companies shifted assets, offices, or businesses operations out of Britain and to continental Europe and Ireland. By the beginning of April 2019, banks had transferred more than US$1 trillion out of Britain, and asset management and insurance companies transferred US$130 billion out of Britain. A March 2019 report from the independent research institute New Financial identified 269 companies in the banking or financial services sector that had relocated portions of their businesses or staff following Brexit; of these moves, 239 were confirmed as Brexit-related. The greatest number of moves were to Dublin (30%), followed by Luxembourg (18%), Frankfurt (12%), Paris (12%), and Amsterdam (10%).
Contributions to the EU
Supporters of withdrawal argued that ending net contributions to the EU would allow for tax cuts or government spending increases. On the basis of Treasury figures, in 2014 the United Kingdom's gross national contribution (ignoring the rebate) was £18.8 billion, about 1% of GDP, or £350 million a week. Because the UK receives (per capita) less EU spending than other member states, a rebate was negotiated; net of this rebate, the contribution was £14.4 billion, approximately 0.8% of GDP, or £275 million a week. If EU spending in Britain is also taken into account, the average net contribution for the next five years is estimated at about £8 billion a year, which is about 0.4% of national income, or £150 million per week. The Institute for Fiscal Studies have said that the majority of forecasts of the impact of Brexit on the UK economy indicated that the government would have less money to spend even if it no longer had to pay into the EU.
Single market
According to economist Paul Krugman, Brexit supporters' assertions that leaving the single market and customs union might increase UK exports to the rest of the world are wrong. He considers the costs of Brexit might be around 2 percent of GDP.
Foreign direct investment
European experts from the World Pensions Council (WPC) and the University of Bath have argued that, beyond short-lived market volatility, the long-term economic prospects of Britain remain high, notably in terms of country attractiveness and foreign direct investment (FDI): "Country risk experts we spoke to are confident the UK's economy will remain robust in the event of an exit from the EU. 'The economic attractiveness of Britain will not go down and a trade war with London is in no one's interest,' says M Nicolas Firzli, director-general of the World Pensions Council (WPC) and advisory board member for the World Bank Global Infrastructure Facility [...] Bruce Morley, lecturer in economics at the University of Bath, goes further to suggest that the long-term benefits to the UK of leaving the Union, such as less regulation and more control over Britain's trade policy, could outweigh the short-term uncertainty observed in the [country risk] scores." The mooted importance of the UK's membership of the EU as a lure for FDI has long been stressed by supporters of the UK's continued involvement in the EU. In this view, foreign firms see the UK as a gateway to other EU markets, with the UK economy benefiting from its resulting attractiveness as a location for activity. The UK is certainly a major recipient of FDI. In 2014, it held the second largest stock of inward investment in the world, amounting to just over £1 trillion or almost 7% of the global total. This was more than double the 3% accounted for by Germany and France. On a per capita basis, the UK is the clear front-runner among major economies with a stock of FDI around three times larger than the level in other major European economies and 50% larger than in the US.
Property market
The BBC reported on 28 April 2017 that property investment firm JLL data shows Asian investors accounted for 28% of the transactions in the UK property market in 2016, up from the 17% the year before – indicating that Brexit is not dissuading Asian property investors. The BBC also cited Chinese international property portal Juwai.com, which reported a 60% increase in enquiries into UK property in the prior 12 months. Property firm CBRE Group said in January 2017 that Brexit has increased risk in UK property markets by creating new uncertainties.
Roaming
With Brexit, EU law is no longer applicable in the UK. This means British mobile network operators — like EE Limited — will be free to charge users for roaming service.
Stock markets and currencies
When the London Stock Exchange opened on Friday 24 June 2016, the FTSE 100 fell from 6338.10 to 5806.13 in the first ten minutes of trading. It recovered to 6091.27 after a further 90 minutes before further recovering to 6162.97 by the end of the day's trading. This equated to a fall of 3% by the close of trading. When the markets reopened the following Monday, the FTSE 100 showed a steady decline, losing over 2% by mid-afternoon. Upon opening later on the Friday after the referendum, the US Dow Jones Industrial Average dropped nearly 450 points or about 2.5% in less than half an hour. The Associated Press called the sudden worldwide stock market decline a stock market crash. Internationally, more than US$2 trillion of wealth in equities markets was wiped out in the highest one-day sell-off in recorded history, in absolute terms. The stock market losses amounted to a total of 3 trillion US dollars by 27 June; up to the same date, the FTSE 100 index had lost £85 billion. Near the close of trading on 27 June, the domestically-focused FTSE 250 Index was down approximately 14% compared to the day before the referendum results were published. However, by 1 July the FTSE 100 had risen above pre-referendum levels, to a ten-month high. Taking the previous fall into account, this represented the index's largest single-week rise since 2011. On 11 July, it officially entered growing market territory, having risen by more than 20% from its February low. The FTSE 250 moved above its pre-referendum level on 27 July. In the US, the S&P 500, a broader market than the Dow Jones, reached an all-time high on 11 July. On the morning of 24 June, the pound sterling fell to its lowest level against the US dollar since 1985, marking the pound down 10% against the US dollar and 7% against the euro. The drop from $1.50 to $1.37 was the biggest move for the currency in any two-hour period in history. The pound remained low, and on 8 July became the worst performing currency of the year, against 31 other major currencies, performing worse than the Argentine peso, the previous lowest currency. By contrast, the pound's trade-weighted index is only back at levels seen in the period 2008–2013. The referendum result also had an immediate economic effect on a number of other countries. The South African rand experienced its largest single-day decline since 2008, dropping in value by over 8% against the US dollar. Other countries negatively affected included Canada, whose stock exchange fell 1.70%, Nigeria, and Kenya. This was partly due to a general global financial shift out of currencies seen as risky and into the US dollar, and partly due to concerns over how the UK's withdrawal from the EU would affect the economies and trade relations of countries with close economic links to the United Kingdom. On 5 January 2017, Andy Haldane, the Chief Economist and the Executive Director of Monetary Analysis and Statistics at the Bank of England, admitted that forecasts predicting an economic downturn due to the referendum have so far been inaccurate and noted strong market performance since the referendum. In January 2021, Euronext became Europe's largest stock market, as London lost its dominance for the first time since 1986.
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