Brexit may have cut UK economy by up to 8%, research suggests
Analysis showed how much the UK could have grown if it had not exited the EU.
By BBC News
Research using Bank of England-linked company data suggests Brexit has left the UK economy smaller than it otherwise would have been.
Brexit may have left the UK economy between 6% and 8% smaller than it otherwise would have been, according to research using company data linked to the Bank of England.
The analysis used data from the Decision Maker Panel, a survey of UK firms used to understand business conditions, expectations and uncertainty.
The research estimates that by 2025, Brexit had reduced UK gross domestic product by between 6% and 8%, with the impact building gradually since the 2016 referendum.
It also estimates that business investment was reduced by between 12% and 18%, employment by 3% to 4%, and productivity by 3% to 4%.
The findings do not mean the UK economy is 6% smaller than it was before Brexit. Instead, they suggest the economy is smaller than it would likely have been if the UK had not left the European Union.
That distinction matters because the economy has still grown in parts of the period since the referendum, but the research argues it has grown more slowly than it otherwise might have done.
The Decision Maker Panel was created after the referendum to track how companies were responding to Brexit-related uncertainty. It surveys firms across the economy and has been used by policymakers to understand investment, prices, employment and business expectations.
Earlier findings from the panel showed Brexit was one of the top three sources of uncertainty for around 40% of UK businesses in the first two years after the vote.
Researchers say the economic impact came through several channels, including weaker investment, reduced demand, management time being diverted towards Brexit planning, and new frictions affecting trade and business operations.
The results add to a wider body of research suggesting Brexit has acted as a drag on UK growth, although estimates vary depending on the method used.
For businesses, the most practical impact has been higher complexity in trading with the EU, additional paperwork, supply chain changes and uncertainty around long-term investment decisions.
For households, slower economic growth can matter because it affects wages, tax revenues, public spending and the wider cost of living.
The findings come as debate continues over the UK’s future trading relationship with the EU and whether closer alignment could reduce costs for businesses.
Supporters of Brexit argue that the UK now has more freedom to make its own laws, control trade policy and set regulations outside the EU.
Critics argue that those freedoms have come with a significant economic cost, particularly for firms that rely on European trade, workers or supply chains.
The research does not settle the political debate, but it adds further evidence that Brexit has had a measurable economic impact on the UK economy.
For Cheshire firms trading with Europe, the issue remains especially relevant. Manufacturers, exporters, logistics companies, food businesses and professional services firms can all be affected by changes to customs processes, regulation, staffing and cross-border demand.