Thursday 09 July 2026 5:53 am  |  Updated:  Wednesday 08 July 2026 12:12 pm

Singapore on Thames or the Sick Man of Europe?: The Economics of Brexit Ten Years from the Referendum 

By: Paul Johnson and Robert Johnson

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Paul Johnson, former director of the Institute for Fiscal Studies and Robert Johnson of the Centre for Cities analyse the economic impact of Brexit and its promise of deregulation and growth

Since the Brexit referendum of 2016, and since 

actually leaving the EU in January 2021, the UK’s economic performance has been feeble. On a per capita basis, the economy expanded by a mere six per cent in real terms between June 2016 and September 2025. Productivity has flatlined and real wages have risen by just seven per cent. Since the eve of the pandemic – closer to when the UK actually left the EU and the single market – the picture is even gloomier. Real GDP per head at the end of 2025 is almost exactly where it was at the start of 2020 (when the year-long transition period began), having grown by less than one per cent. 

Of course, none of that tells us anything about the economic consequences of Brexit. Growth along all these dimensions was also feeble in the years running up to the referendum. Covid, the energy price spike after the Russian invasion of Ukraine and other decisions taken by the UK government have all had their effects. It is also important to distinguish the effects of the vote for Brexit itself from the political chaos that ensued. Suppose the vote had gone 52 per cent to 48 per cent the other way. Would we have had a period of political calm and wise economic policy? It seems doubtful. Political chaos and historically high levels of economic and political uncertainty might well have followed. 

That said, we do know that financial and currency markets responded quickly to the referendum result. Sterling depre iated by around 10 per cent on a trade-weighted basis immediately after the vote, raising prices faced by consumers by an estimated 2.9 per cent in the two years thereafter, with a consequent effect on reducing real living standards. For firms, the referendum and its aftermath of political instability increased uncertainty and raised barriers to investment. 

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For the rest of this chapter, we focus mostly on the longer term consequences. We start by outlining, briefly, the key economic claims and forecasts made at the time of the referendum. These matter not just for historical purposes, but also because ‘consensus’ estimates and assumptions made by key policy makers, notably at the Office for Budget Responsibility, have changed little since then. We then present some of the basic data on UK economic performance over the period, and look at how that compares with similar countries. We proceed to consider in more detail what has happened to trade and business investment, the key routes through which any economic impacts are likely to have been transmitted. We briefly review claims that big regulatory changes might have had positive effects. Immigration is dealt with elsewhere in this volume. 

The Debate

The economics profession was, in the run-up to the referendum, almost unanimous in its view that Brexit would be damaging for the UK’s economy. In one poll of professional economists, 88 per cent expected national income to be negatively affected over the subsequent five years by leaving the EU and single market. Just four per cent thought GDP would be positively affected. 

That might come as a surprise to those who remember that there always seemed to be an economist ready to appear or on either side of the argument. That provided a false impression. 

Trade barriers create costs. The EU single market is the world’s best integrated multinational trading arrangement, quite different from standard free trade agreements. 

Some 44 per cent of the UK’s exports went to the EU, and another 20 per cent to the United States. Other countries’ shares of trade, especially of exports, were low. It would have required very large proportional increases in trade with non-EU countries to make up for small proportional changes in trade with the EU. A substantive change to trading arrangements with the United States was never on the cards. 

The fact that the EU is close to the UK also matters. The dominant model in the economics of trade is known as the ‘gravity model’ – the gravitational pull of big and close trading partners is greater than that of small and distant ones. The EU is both big and close. 

Given the scale of that trade and the importance of being part of a large single market, it is unsurprising that, in a survey of forecasts carried out just before the referendum, only one of eight showed a positive impact of leaving the EU, and that was one carried out by ‘Economists for Brexit’. Forecasts from the IMF, OECD, Treasury, National Institute for Economic and Social Research, PwC and Oxford Economics all suggested significant negative effects on the size of the economy, though with a considerable range, depending on methodology and what effects were included. At the top end, some forecasts suggested a hit to the economy as great as eight per cent of national income by 2030, though most suggested an effect of something between two and five per cent.

A second strand of the economic argument related to the fiscal consequences. This, arguably, proved far more important in the debate. In a purely static sense, not being in the EU saves money because the UK was a net contributor to the EU budget, to the tune of some £8bn a year in 2015. That is a much easier number to understand than the range of possible effects on growth resulting from the operation of different economic forecasting models. 

Even so, pro-Brexit campaigners chose to use a different, bigger number – the gross contribution, ignoring both the rebate that the UK received and the money spent by the EU in the UK on, for example, agricultural subsidies and support for the UK’s poorer regions. Using the gross number of £18bn a year, they claimed that the UK government would have an additional £350m a week to spend on the NHS. This was tendentious but effective. 

Figure 25.1 shows UK real GDP per capita since after the financial crisis in 2010.

Average per capita growth rates were 1.4 per cent per year leading up to the referendum and remained relatively stable in the period after that, up to the eve of the pandemic, at 1.5 per cent per year. The implementation of the Trade and Cooperation Agreement (TCA) – the formal exit of the UK from the EU – happened in January 2021 during the Covid pandemic. So, rather than looking at........

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