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A recent analysis based on internal Bank of England data reveals that the UK economy has experienced a 6% reduction in growth as a result of Brexit. This conclusion comes from examining the financial results, perspectives, and decisions of thousands of British firms since the 2016 referendum, using data which the Bank of England typically employs in setting interest rates. The study reconstructed potential economic growth trajectories to estimate how the UK might have developed had it remained in the European Union.
The findings indicate that roughly half of the economic downturn is attributable to the immediate uncertainty and surprise following the Brexit vote. The remaining impact stems from increased trade barriers that emerged after the UK exited the customs union and single market in 2021. Though the research highlights these factors, some critics argue that it does not sufficiently consider external influences such as the strong performance of the US investment and technology sectors or the European energy crisis that occurred four years ago.
Co-author Nick Bloom, a British professor at Stanford University, emphasized that the UK had been growing rapidly before Brexit and could have maintained some of that momentum if not for the disruptions. He noted, “the Bank of England company data offered important corroboration.” Bloom’s paper concludes that Brexit’s economic effects were “substantial” but unfolded gradually over the decade following the referendum.
In recent months, senior officials at the Bank of England have become more open about Brexit’s economic repercussions. The Bank’s governor, Andrew Bailey, remarked that the UK’s economic activity and growth have slowed because reducing access to export markets negatively affects growth and productivity. He acknowledged that the impact on financial services, although negative, was “nowhere near as detrimental as many people predicted at the time.” Meanwhile, some economists caution that it remains challenging to accurately model the counterfactual scenario of the UK’s growth without Brexit, especially amid ongoing global crises, which can lead to overestimating Brexit’s economic effect
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