How has Brexit affected the UK economy? Stanford researchers estimate that Brexit cut UK GDP by 6% to 8% by 2025, with investment hit hardest, though the size depends on method and time horizon.
Picture two headlines on the same day. One says Brexit cost the economy dearly, and the other says the pandemic and energy prices explain everything. The evidence sits between them. Brexit effects are measured against a counterfactual, they build up gradually, and the economists who calculate them say they have factored in the global turmoil.
This page gives a whole-economy overview. The wider economic impact of brexit, including migration, is mapped in the hub for this topic.
The headline estimate against early forecasts
Before the referendum, forecasts expected a long-run hit of about 4% of GDP, according to the Econofact summary of the research. The gap is explained by timing. The Stanford authors find that those forecasts were accurate over a 5-year horizon but underestimated the impact over a decade.
The table below sets the most common assumptions against what the estimates show.
| Common assumption | What the estimates show | Planning use |
|---|---|---|
| Early forecasts exaggerated the damage | Pre-referendum forecasts expected about 4% of GDP over the long term. Stanford estimates UK GDP 6% to 8% lower by 2025. | Treat the early forecasts as a lower bound for the long run, not as the final cost. |
| The damage is mostly about trade | Stanford estimates investment 12% to 18% lower, employment 3% to 4% lower and productivity 3% to 4% lower. | Look at investment and productivity, not only at trade flows. |
| The UK kept pace with comparable economies | UK GDP grew more slowly than the average of 33 comparable countries after the referendum. Business investment is estimated 18% lower on average. | Compare the UK with peer economies rather than only with its own earlier performance. |
The figures come from the Stanford SIEPR working paper and the Econofact analysis of UK cost estimates.
A single range should not be read as a settled official number. The 6% to 8% figure is an academic estimate of a cumulative effect, so it suits a discussion of long-run scale better than a forecast for any single year.
Investment, productivity and jobs
Business investment is the channel where the estimates agree most closely. Different methods land in a similar place, which makes it the most dependable part of the picture.
- Investment estimates cluster near 12%. Stanford estimates investment was 12% to 18% lower. Firm-level data in the Econofact review show business investment 12% lower by 2023/2024 than it would otherwise have been. The BBC reports NIESR and NBER putting it 12% to 13% below where it would have been.
- The peer comparison is larger. UK business investment is estimated to have been 18% lower on average than in comparable countries.
- Weak investment feeds through to output. The BBC cites a reduction of about £29bn, or 1.3% of the economy, since 2016 from lower investment.
- Productivity is lower by a few percent. Stanford puts the fall at 3% to 4%, and the Econofact analysis reports 3.5% for private-sector companies by 2023.
- Employment shows a similar order of magnitude. Stanford estimates employment 3% to 4% lower. Econofact reports 3% for the entire economy and 3.5% for private-sector companies after seven years.
The proposed mechanism is uncertainty. The Econofact analysis describes the referendum and the long negotiation as generating large, broad and long-lasting increases in uncertainty, linked to lower investment and productivity. Firms postpone projects when they cannot tell what trading rules will apply, and that delay compounds over several years.
Labour effects also differ between places, which the guide on how does migration affect local communities uk examines. For the whole-economy picture, the key point is that employment and productivity estimates are a few percent, much smaller than the investment estimates.
Trade volumes and product variety
Trade intensity has fallen on every measure reported. Compared with 2019, the BBC reports that UK exports to the EU were 14% lower in 2025 and imports were 10% lower. NIESR measures against a different benchmark, the trend that could have been expected, and finds exports 16.9% lower and imports 16.1% lower. The two sets of figures do not conflict. One compares actual flows with an earlier year, and the other compares them with a modelled path that includes growth that did not happen.
Lower volumes are only part of the loss. A study from Aston University, reported by the BBC, estimates a loss of 53.8% of the types of exports and 31.5% of the types of imports. Fewer product lines matter because of the productivity mechanism: Econofact notes that productivity may have been dampened over the longer term because of lower trade and less specialisation.
The trade deal did not bring tariffs back. It guaranteed zero tariffs on exports to the EU, but the BBC reports that non-tariff red tape still causes delays and costs. Businesses should therefore expect the burden to come from paperwork and compliance rather than duties. The detail by sector and customs process is covered in how has brexit affected uk trade with the eu.
Growth against similar economies
Since the referendum, UK GDP has grown more slowly than the average of 33 comparable countries, according to the Econofact summary. This peer comparison is the strongest answer to the claim that a global slowdown explains the UK result. A global shock should affect comparable economies too, and a gap relative to them points to something specific to the UK.
Sterling is part of the same story. The BBC reports that the pound fell sharply after the referendum and has since traded lower, particularly against the dollar and the euro. A weaker currency raises the cost of imports, which matters for an economy that still imports heavily from the EU.
Services deserve separate mention because they make up over 80% of total UK economic output, as the BBC notes. Services exports to the EU are up 57% over the last decade. That figure shows services trade has kept growing, but it does not show how much faster it would have grown without Brexit. The counterfactual estimates above remain the better guide to the net effect.
Separating Brexit from the pandemic and the energy shock
Separating Brexit from other shocks is hard because the pandemic struck in the spring of 2020, within months of the UK formally leaving the EU, and the war in Ukraine and the 2022 energy price shock followed. The BBC reports that the clear consensus of economists making the calculations say they have factored in the global turmoil, although the size of the Brexit effect remains contested.
Estimates differ for identifiable reasons, and each one changes how a figure should be used:
- Method. Country-comparison studies, firm-level data and trend-based models answer slightly different questions, which is why investment is 12% to 13% lower in some studies and 18% lower in others.
- Horizon. A figure measured at 5 years will be smaller than one measured later, because the Stanford paper finds the impact accumulates and that early forecasts underestimated the decade-long effect.
- Benchmark. Comparing with an earlier year, with a pre-2016 trend or with peer countries gives different results, as the trade figures show.
- Source type. Official forecasters such as the Office for Budget Responsibility and the Bank of England publish their own assessments. Comparing their stated assumptions on trade and productivity with the independent ranges above is the clearest way to see where numbers diverge.
For decisions, use ranges rather than single points, and read any figure alongside its horizon and benchmark. A 2025 estimate and a long-run forecast are not the same quantity.
Frequently asked questions
| Question | Answer |
|---|---|
| How close was the referendum result? | Leave won the June 2016 referendum by 51.9% to 48.1%, according to Econofact. |
| When did the UK formally leave the EU? | The UK left on 31 January 2020, and a transition period ran until 31 December 2020. |
| Did Brexit take up management time? | Yes. In the same Econofact analysis, nearly one in ten Chief Financial Officers were spending six or more hours per week on Brexit preparation. |
| Do new trade deals offset the loss? | Not by much on current calculations. The BBC reports that government calculations show UK trade deals only slightly boosting growth, by fractions of a percentage point over decades. |