Brexit at Ten: Still waiting for the dividend

We are now a decade on from the Brexit referendum, as a topic which fuelled much righteous anger on this blog fades into history. Anyone who has known me long enough will know that I argued vociferously against Brexit. The economic arguments did not stack up, and the political risks associated with a go-it-alone policy in a world in which the frontiers of globalisation were already receding were simply too high – as Donald Trump has demonstrated in spades. It should therefore come as no real surprise that many voters now appear to be experiencing buyer's remorse, with around 60% believing that Brexit was a mistake (chart above).

Much ado about politics

Much has changed in the past ten years, but the issues which drove the Brexit vote in the first place have, if anything, intensified. Economically, the UK is struggling. The productivity collapse in the wake of the GFC has not been addressed and as a result growth remains weak. Consequently, voters increasingly feel they have to run harder just to stand still. It should not be a surprise that they are seeking alternatives to a political system they feel is not working for them. Just as austerity fuelled resentment that was successfully channelled by populist movements in 2016, current economic frustrations are again creating fertile ground for anti-establishment politics. Those same actors who once promised that Brexit would deliver an economic transformation are now drawing on dissatisfaction with weak growth and stagnant living standards to sustain their electoral appeal.

The campaign and its aftermath eroded trust in politicians which shows no sign of being restored: between 2016 and 2019 the Conservatives argued amongst themselves about how to deliver Brexit; the Labour Party dithered on the sidelines and the Lib Dems adopted an unrealistic position that a second referendum was necessary to validate any deal (they were not necessarily wrong about that but it was politically naïve). None of those who advocated a policy which was clearly not in the national interest has ever been called to account. Boris Johnson even used the Brexit referendum as a stepping stone to achieving his ambition to become Prime Minister, although he proved as disastrous in that role as I expected. Of all those who campaigned long and loud for Brexit, only Nigel Farage remains in frontline politics, leading his third political party since 2016 as the latest incarnation of UKIP rides high in the polls.

Such is the power of populism that a sixth Prime Minister in the last 10 years has now left office, one through electoral defeat and the others under sustained political pressure (ironically the previous six Prime Ministers spanned 40 years). Keir Starmer is being punished as much as anything for lacking Farage's ability to connect with voters and communicate simple political messages. Admittedly, his government has been far too timid in tackling some of the problems faced by the UK and it failed in one of the key things I expected of it in 2024: “Making voters lives better is the one thing that will raise the chances of a second term in office – a second term that will undoubtedly be required to properly fix many of the things in the economy that require improvement.” But one thing we learned from the Brexit referendum is the power of style over substance. Voters want simple answers to complex problems very quickly and Starmer was honest enough not to promise that, even if he acted too slowly. Frankly, it is hard to believe that changing the Prime Minister is going to resolve problems that are rooted less in leadership than in the mismatch between complex economic realities and voters’ demands for simple, rapid solutions – particularly when politicians have little control over the underlying economic and institutional constraints that continue to shape outcomes.

A quick look at the economics

All of the empirical evidence points to output losses compared to what might have happened had the UK remained in the EU. A widely reported paper by Nick Bloom et al[1] (here) found that UK GDP was reduced by 6% to 8%. My own calculations, in joint work with my colleague Ben Caswell, based on synthetic control analysis came to a similar conclusion (here, see chart below) [2]. Clearly, there are big variations in the magnitude of the output loss – the OBR, for example, reckons with a 4% hit to GDP – but no evidence has been presented to suggest that the UK is better off.

Since Brexit was, in the words of Pascal Lamy, “the first negotiation in history where both parties started off with free trade and discussed what barriers to erect”, an assessment of the UK trade numbers is a good place to start. By Q1 2026, the volume of UK merchandise exports to the EU was 13.1% below 2019 levels. But the picture is not quite so simple: on my calculations[3] the collapse in merchandise volumes was offset by a surge in services exports, to leave total export volumes to the EU 0.8% higher than 2019 levels.

But just because UK exports to the EU are broadly flat does not mean that they have performed strongly. The relevant question is not whether exports to the EU are higher or lower than they were in 2019, but how they have performed relative to a plausible counterfactual. To put some flesh on these bones, total EU imports increased by 12.1% between 2019 and 2025, while world trade volumes increased by 14% over the same period compared with a rise in UK exports of 5.8%. Whichever way we look at it, UK export volumes appear to have underperformed. Indeed, Ben’s analysis suggests that the impact of non-tariff barriers is greater than that of tariff barriers themselves, due to factors such as rules-of-origin requirements and customs checks. On his calculations, these factors “reduced UK exports to the EU by around 5.7 per cent and imports from the EU by around 9.1 per cent relative to their pre-Brexit baseline”.

An additional channel is the impact on corporate decision making. Business uncertainty rose sharply after the referendum and only began to dissipate after the UK left the EU, by which time we were in the middle of the Covid pandemic. Businesses had no idea about the trading arrangements they were likely to face with the EU, and were forced to make contingency plans for eventualities that never materialised. All in all, our research suggests that “UK business investment is between 12-13 per cent lower than it otherwise would have been” in the absence of Brexit.

While the UK may be poorer than it might otherwise have been, it has not been the complete disaster that many feared. The labour market has held up reasonably well with unemployment remaining relatively low and the City of London still Europe’s preeminent financial centre. In fact, for most people life has continued as normal – for the most part people would not immediately notice any difference to pre-Brexit Britain. But Brexit has not resolved many of the issues that its proponents promised.

One of the biggest challenges has been immigration. Despite ending free movement from the EU, the UK economy continues to depend heavily on migrant labour in sectors where employers have struggled to recruit sufficient domestic workers, despite the introduction of a more restrictive immigration regime. Net migration fell sharply in 2025, to 171k from 331k in 2024 (chart above). Tighter visa rules reduced the inflow of workers, students and their dependants, while many of those who had arrived during the 2022-23 boom began to leave the UK. The tightening of rules for students is particularly bad news for universities which rely heavily on the fees paid by foreign students. Meanwhile politicians have struggled to stem the flow of immigrants illegally crossing the channel, an issue which has resonated with voters and given such a lift to the Reform Party.

What next?

As it currently stands, Brexit has not delivered on the promises that were made in 2016. Doubling down in the hope of doing Brexit “properly” is not the way forward. Closer ties to the EU are the solution, but negotiations with the EU will not prove easy. The closer the UK wants to move towards the EU, the more concessions the EU will demand, as Switzerland has found out in recent years.

Moreover, the EU has changed since the UK was last a member. It is a larger entity with a changed geography that has seen the geopolitical centre of gravity moving further east. Since 2016 the EU has become more openly a geopolitical actor following the Russian invasion of Ukraine, and is not just a regulatory and trade bloc. Post-Covid, fiscal integration has increased with the creation of NextGenerationEU, a large-scale common borrowing and recovery fund, which marks a shift toward shared fiscal capacity at the EU level. Even if re-entry were an option – which currently appears highly unlikely, not least because of the continuing strength of Eurosceptic sentiment in UK politics – it would involve significant reconvergence costs and transitional frictions rather than a simple reversal of Brexit. With businesses having adjusted to the post-Brexit environment, albeit reluctantly, they would be equally loath to incur a new set of additional costs.

Brexit is not solely responsible for the UK's economic difficulties, but closer ties to the EU might mitigate some of the more annoying bureaucratic issues. The country's underlying problems – weak productivity growth, low investment, skills shortages and a political culture increasingly drawn to simple solutions for complex challenges – pre-date the referendum and will persist regardless of its constitutional relationship with Europe. There are some things that the UK government can do which do not involve seeking closer integration with the EU – notably reform of the planning and welfare systems. But after a decade of debate, one conclusion seems difficult to avoid: Brexit has imposed economic costs while failing to address many of the concerns that drove the vote in the first place. The task now is not to refight the battles of 2016, but to find a pragmatic way forward that recognises both the realities of Brexit and the benefits of closer cooperation with our largest trading partner.

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[1] Nicholas Bloom, Philip Bunn, Paul Mizen, Pawel Smietanka, and Gregory Thwaites ‘The Economic Impact of Brexit,’ NBER Working Paper 34459 (2025), https://doi.org/10.3386/w34459

[2] Caswell, B and P Dixon (2026) ‘Brexit and the UK Economy Ten Years On: Stocktake and Future Options’, NIESR Policy Briefing

[3] Since the UK does not provide separate price deflators for EU and non-EU services trade, I simply deflated the nominal regional values by the aggregate services export price deflator.

Eight years on

Eight years on from the Brexit referendum, the world looks a very different place. While in 2016 it was the UK which had to deal with an onslaught of rampant populism, it is now a feature of the political landscape across the industrialised world. The European Parliament elections made it clear that electorates across the EU are running out of patience with centrist governments which have failed to deliver on promises to make life better for long-suffering voters (chart above). Meanwhile on the other side of the Atlantic, Donald Trump has every chance of getting back into the White House as he feeds on the discontent of an America unsure of its place in the world.

As we head towards a UK general election that looks set to banish the Conservatives into the political wilderness, it is possible that the UK may be one of the few western democracies about to swing back towards the political centre. Yet it is notable that the policy which helped Boris Johnson win an overwhelming majority in 2019 has not even figured on the 2024 campaign trail. The Tory party cannot bring itself to admit that its signature policy has failed while the Labour Party is so fearful of alienating voters in Red Wall seats that it simply will not go near the issue of Brexit. But it is the Tories who will have to carry the can, since this is a policy with which they are closely associated, and spent so much political capital delivering the hard Brexit that many of us warned against that it has become an albatross around their neck. Moreover, it absorbed so much political bandwidth that the party was unable to deal effectively with the other tasks involved in governing. This included managing the pandemic and ensuring compliance with the basic standards required for governance in modern democracies which is one reason why they lag so far behind in the polls (chart below).

Look beyond the 2024 election

However, just because the electorate is about to hand the keys to Downing Street to a party of the centre-left does not mean that they are about to repudiate some of the more extreme versions of nationalist politics. If the performance of Reform UK in the polls is to be believed, quite the opposite. Recent history suggests that political turnarounds are very much in fashion. Back in 2021, not long after Labour had taken an election hammering and lost one of its safest seats in a by-election, it seemed that the centre-left was on the ropes. When the SPD unexpectedly won the German election in 2021, it was not long before sentiment turned against them, while Emmanuel Macron’s 2022 election triumph is a distant memory as the right-wing Rassemblement National is currently the most popular party ahead of the snap French parliamentary election. Life, as they say, comes at you fast. And just as Brexit was a cry of rage against the prevailing status quo in 2016, so we should interpret any (potential) Labour landslide as a rejection of years of Conservative government incompetence rather than a general buy-in of what Labour are offering.

If a week is a long time in politics, as former UK PM Harold Wilson once remarked, a couple of years is an aeon. Thus, to the extent that politics is a long game, we have to look beyond the upcoming election and think about what the future of politics will look like. Labour’s ability to deliver any form of economic improvement over the next five years will determine whether they stand a chance of winning a second term. Labour will have to manage expectations in such a way that they can deliver some progress and that they are not swept away in a tide of disappointment later in the decade. But if they do not deliver, what might the options look like in five years’ time? This in turn depends on how the Conservatives respond to what currently looks like being a very heavy defeat. Will they double down and move further towards the populist end of the spectrum? Or will they do what Labour did in the wake of their heavy defeat in 2019 and tack back towards the political centre?

It is currently difficult to envisage the latter option, partly because many of the more moderate members of the parliamentary party were purged by Boris Johnson in 2019. The alternative is thus a shift towards right-wing populism of the sort espoused by many prominent government ministers of recent years, and the non-negligible possibility of a tie-up with Nigel Farage’s Reform UK. It may sound far-fetched – a wild fantasy dreamed up the political commentariat – but as the rise of RN in France and the AfD in Germany illustrate, if the traditional parties cannot enthuse and inspire voters, they will look for alternatives.

The case for tax reform

It is thus evident that Labour will have to deliver something tangible in order to pacify the electorate and generating faster growth is a priority. In contrast to 1997, the economy's trend growth rate has slowed considerably (chart below) which is excerbating the fiscal constraints under which the government will be forced to operate. Labour's manifesto offers nothing particularly interesting in terms of economic thinking, with a very limited set of fiscal promises. Obviously, Labour does not want to give too many hostages to fortune but if I were the new Chancellor, one of the first things I would do is to announce a review of the tax system, building on the excellent and under-appreciated Mirrlees Review of 2011. One reason for doing this is that the government needs to quickly find some fiscal space. In much the same way as the Blair government announced reform of the monetary policy framework in 1997, a fiscal reform is overdue. It may not deliver a significant amount of revenue immediately but if a new government is serious about tax reform, it may be able to open the fiscal taps halfway through its first term on the basis that the returns will come through later.

What might tax reform look like? It certainly will not be a radical big-bang on day one. It is likely to take the form of a Royal Commission which will report after two years with a view to implementing changes in 4-5 years’ time. A more detailed look at possible measures is a subject for another day, but one idea whose time may have come is a land value tax which is a more economically efficient form of property tax than is currently in place today. There is also scope for reforms to the taxation of savings, carbon, wealth, corporates – you name it, and it can be done better. There is also a political dimension to this. Shifting even a tiny bit of the burden away from wage earners (i.e. voters) onto less heavily taxed areas of the economy would go some way towards making voters feel a bit better about things, without necessarily reducing the tax take.

Last word

But whatever the next government wants to do on the economic policy front would be made a lot easier if there were fewer trade frictions with the EU. Although Labour has promised that the UK will not rejoin the EU, it does want to “reset the relationship and seek to deepen ties with our European friends, neighbours and allies.” While it has ruled out rejoining the single market, it does want “to improve  the UK’s trade and investment relationship with the EU, by tearing down unnecessary barriers to trade.” Whatever one’s views on Brexit in 2016, and whether or not they have subsequently changed, the UK does need closer economic and political ties with the EU than we have had in recent years. Those politicians who promised a brave new post-Brexit economic world have been found out. It is time to hit the reset button.

Seven years on

It has been rather quiet on the blogging front these past few months as other projects impinge on my time, but every year around this point I take a look at where we stand on the Brexit issue, and given what has happened in recent weeks it would be a shame to break with tradition.

Johnson disappears and so does a lot of support for Brexit

The most noteworthy event was Boris Johnson’s resignation as an MP – an action precipitated by a report from the Parliamentary Committee of Privileges which would otherwise have recommended a suspension from the House of Commons. Never one to accept personal responsibility, Johnson flounced out of parliament, blaming everyone but himself for the circumstances of his departure. His exit nonetheless raised a whole raft of questions surrounding his toxic legacy and the circumstances that allowed him to thrive.

Both of these issues have been well documented on this blog over the past seven years and have their roots in the poisoned well of public debate triggered by Brexit. Quite simply, Brexit was a strategy designed to further the ends of those populist nationalists who largely happened to be members of, or associated with, the Conservative Party. This is not to say that the parliamentary Tory party of 2016 was rabidly pro-Brexit but it became so when the tone of public debate shifted in the wake of the referendum such that those who questioned the wisdom of the strategy were denounced as enemies of the people. It was in this environment that Johnson was enabled to rise to the top, promising his oven-ready Brexit deal despite the fact it was known in 2019 to be a far less economically attractive proposition than that negotiated by his predecessor, Theresa May. The same supporters egged him on to prorogue parliament in 2019, as he sought to subvert due parliamentary process. In so doing, Johnson kicked 21 Tory MPs out of the party who had the temerity to oppose his strategy. Perhaps it was that point that the Conservative Party became spectacularly unmoored.

Admittedly Johnson did win a handsome electoral majority in December 2019, although this was due in large part to the quality of an opposition led by Jeremy Corbyn. Not long afterwards, a combination of the Covid pandemic and apparent lack of interest in the business of governing caused the government to rapidly lose its way. Indeed one of my biggest concerns in recent years has been the lack of effective governance.

As many of those who agitated in favour of Brexit gradually leave the stage, they leave behind a toxic legacy. Following Johnson’s ousting from Downing Street last year and the implosion of the Truss premiership, the gilt has been slowly peeling from the Brexit crown. Since autumn 2022 the survey evidence points to a lead of 20 points for those who believe that voting to leave the EU in 2016 was a mistake. That does not exactly scream “will of the people.”

It's not just Project Fear

Many of the fears of those who pointed out the economic consequences of Brexit are now being realised (I include myself in that camp). It is simply more difficult to conduct cross-border trade in a world where barriers have been erected where once there were none. As of Q123 the volume of UK goods exports was 9.1% below the average levels in 2019 whilst import volumes were down 8.1% (admittedly the figures are volatile on a quarterly basis so we should not over-interpret them). But the OBR has pointed out that the UK’s trade intensity (trade as a share of GDP) has fallen below that in other G7 economies.

The fall in immigration from the EU has also contributed to the UK’s economic difficulties in a material way. Since 2020, there has been net outward migration of EU nationals: no longer can the UK rely on skilled labour from continental Europe to fill gaps in the domestic labour market. Although this has been more than offset by a net inflow of non-EU nationals (+606k in the year-ending December 2022), only 30% of them came to work, with almost as many being granted leave to remain on humanitarian grounds and therefore not immediately eligible to work (most of the remainder came to study - chart above). Labour shortages have contributed to second round inflation effects, following Covid-related supply bottlenecks and an energy price spike, which are making life harder for many. This is not to say that Brexit is wholly responsible for the cost of living crisis but its role cannot be denied.

However, to get a wider picture I have updated my estimate of the hit to UK GDP based on synthetic control analysis which attempts to measure the performance of the UK economy relative to a panel of 23 similar economies that did not experience the disruption of Brexit (chart above). Last year, I estimated that by Q122 the UK had underperformed the control group by 3.5%. This year my estimate suggests that the underperformance gap widened to around 6.5% by Q123 (admittedly better than the double digit figures recorded in 2020 and 2021 but still alarming). The figures are distorted by the pandemic period when differences in the way non-market services were recorded across economies made cross-country comparisons very difficult. Nonetheless, rebasing the figures at mid-2021 (by which time many of the pandemic restrictions were being eased) actual GDP still underperforms the control total by around 2.5%.

These figures have to be treated with caution. Nonetheless they do suggest that Brexit has imposed a sizeable hit to the UK economy. This should come as no surprise: The way that the UK trades with Europe has changed and it is no longer as easy to cross borders as it was prior to 2021. Eurostar services between London and Amsterdam, for example, have been suspended for a time as construction work means there is no space to perform passport and baggage checks in Amsterdam (ironically well reported in the Brexit-supporting Daily Telegraph).

What happens now?

Nobody really knows. Labour has ruled out returning to the European single market and the customs union, promising instead a “pragmatic” relationship with the EU. Obviously it is trying to win back voters in its core seats where it lost out to Boris Johnson’s promise of an oven-ready deal. But the polling evidence suggests that closer relationships with the EU would not be a vote loser.

Brexit remains an emotive subject. Economically, it poses additional costs at a time when global inflationary pressures are rising, along with interest rates; productivity growth remains sluggish; the fiscal position is less than ideal and the demographic profile is not supportive of a decent medium-term economic rebound. Some of its strongest proponents continue to claim that a “true” Brexit has not yet been tried so it is no surprise that it has failed to yield any benefits yet. Such people are the equivalent of flat-earthers who would not recognise facts if they were presented in a gift-wrapped box. They are, however, increasingly a minority who will probably be left howling at the moon as the political pendulum swings back towards the centre while the likes of Nigel Farage represent a no-trick pony.

However, nobody has the stomach to overturn the events of 2016 for fear of the bitterness it would unleash. It will take a new generation of politicians, untainted by events of the past decade, to find a rapprochement with the EU. By the time that happens, a future generation of historians will likely judge Johnson and his ilk as harshly as those of us who predicted much of the disaster he unleashed.