Brexit has left Britain’s economy smaller, analysts say

Britain’s post-Brexit economy is now being measured in lost output, weaker trade and a long-run productivity hit that analysts say is baked into the country’s growth path. The Office for Budget Responsibility’s latest March 2025 forecast says the Trade and Cooperation Agreement, which took effect on 1 January 2021, will leave long-run productivity 4% below what it would have been inside the European Union.

The OBR says around two-fifths of that productivity damage had already been done by the time the deal came into force, and it expects exports and imports to be about 15% lower in the long run than in the EU membership counterfactual. It attributes much of the drag to higher non-tariff barriers in UK-EU trade, a shift that has made cross-border commerce slower, costlier and less predictable for firms tied to continental supply chains.

Independent research has pointed to similar losses. The Centre for European Reform estimated in June 2022 that Brexit had cut UK GDP by 5.5% by the second quarter of 2022. In that analysis, investment was 11% lower and goods trade 7% lower than in a version of Britain that had stayed in the EU. On the same assumptions, annual tax revenues would have been about £40 billion higher, a gap roughly comparable to the scale of the tax rises announced by then-Chancellor Rishi Sunak in March 2022.

The burden has not been spread evenly. Work in a UK in a Changing Europe and VoxEU collection found a sudden and persistent 25% fall in UK imports from the EU relative to the rest of the world after the TCA began, a sign that the biggest pain has fallen on businesses and consumers most exposed to EU supply chains. Another chapter in that collection estimated Brexit added 6% to food prices over the two years to the end of 2021, hitting households directly through the checkout.

The trade figures have remained weak. The Office for National Statistics said the UK’s total goods and services trade deficit widened to £7.0 billion in the first quarter of 2026, with the goods deficit at £59.3 billion. It also reported that goods exports fell by £2.7 billion in April 2025, including a £0.6 billion drop in exports to the EU. For economists, the argument is no longer whether Brexit carried an economic cost, but how large that cost was and how much of Britain’s slower growth will now endure.