Bank of England Data Analysis Shows Brexit Delivered 6% Blow to UK Economy
The UK economy has sustained a 6% reduction in growth attributable to Brexit, according to an analysis of proprietary Bank of England data. Economists examined information gathered from thousands of British companies since the 2016 referendum, typically used by the Bank to inform interest rate decisions, to model the nation's economic trajectory had it remained within the European Union.
Approximately half of this economic impact stemmed from the immediate surprise and prolonged uncertainty following the referendum vote. The remaining decrement is attributed to increased trade barriers erected after the UK's departure from the customs union and single market in 2021.
Professor Nick Bloom of Stanford University, a co-author of the study, highlighted that the UK's rapid growth preceding Brexit suggests it could have maintained pace with economies like the US in the absence of such disruption. He emphasised the corroborative value of the Bank of England's detailed company data.
The study concludes that “there was a substantial economic impact on the United Kingdom, but it arose gradually over the subsequent decade.” This aligns with recent, more candid statements from Bank of England Governor Andrew Bailey, who noted that Brexit has resulted in lower levels of economic activity and growth by diminishing export markets and impacting productivity.
While some economists dispute the precise modelling of hypothetical growth scenarios and suggest such studies may overstate Brexit's impact amid other global crises, this research marks the first instance of confidential Bank of England corporate sector data being used to isolate these effects. The Decision Maker Panel data, originally established in 2016 specifically to gauge Brexit's economic impact, provided crucial insights by tracking firms' exposure and reported financial changes.
Prime Minister Keir Starmer has announced a July summit with EU counterparts to negotiate agreements on food and farm exports, electricity, and emissions trading, with further areas of cooperation anticipated for discussion.
