The statistics that reveal the true cost of Brexit

It has been five years since Brexit “got done” – and voters and politicians alike are still counting the cost. Britons voted to leave the European Union by 52 per cent to 48 per cent in 2016, in a rare referendum that triggered the resignation of prime minister David Cameron. The United Kingdom then officially withdrew from the European Union on 31 January 2020, followed by a transition period that lasted until January 2021. Brexiteers promised a new age of British sovereignty, a crackdown on migration and the much-derided “£350m a week” that could be diverted from the EU back into the NHS. But half a decade on, and by many metrics, Brexit appears to have missed the mark.

The cost of Brexit is still being determined, but the government watchdog estimates that the economy will take a 15 per cent hit to trade in the long term, while experts suggest that the UK has suffered £100bn in lost output each year. Since Britain left the EU, migration has been at the highest levels since records began; while key sectors face staffing shortages. And almost six in 10 Britons (59 per cent) think that Brexit has gone fairly or very badly, with just 12 per cent believing it has gone well, according to a YouGov poll in October. UK trade expert David Henig told The Independent: ”The UK now has significant trade barriers to its neighbours. It’s something we will have to live with. We will not be allowed to forget it; there will always be issues.”

Brexit-optimist economist Julian Jessop, a fellow at the Institute of Economic Affairs, admitted that Brexit has made it harder or “impossible” for small businesses to adjust. “The UK’s departure from the EU has undoubtedly had some negative effects on the economy, notably through reductions in trade, shortfalls in business investment, and disruption to labour markets,” he told The Independent. However, he added that the “overall drag on exports and imports has been much smaller than feared”. Former deputy prime minister Lord Heseltine said that nearly five years on, Brexit “has been a historic disaster”.

“It has destroyed Britain’s leadership in Europe just at a time when there was a critical need (for it), it has closed off opportunities for the younger generation to share in the benefits of Europe and it has denied Britain’s industrial base access to the research and policies of Europe. Our economy is much worse because of it and there is no reputable authority that denies this.

“I think the British people know that they were deceived and the deceit is measured in reduced living standards,” he added. Below, we look at how the numbers stack up.

The latest Treasury estimates show that the cost of Britain’s settlement with the EU stands at approximately £30.2bn in total. This is separate from any estimates of lost money from separating from the EU. As of the start of 2024, the bulk of this settlement (£23.8bn) had already been paid. Approximately £6.4bn still remained to be paid out to the EU in 2024 and onwards. The government has not yet published the figure to the end of 2024.

However, this cost is hardly comparable to the forecasted losses from exiting the EU in terms of GDP and trade. A government spokesperson said: “It is important that we look forward, not backwards, that we do not reopen the Brexit divides, and that we make Brexit work for the British people. “That is why we are resetting the relationship with our European friends to strengthen ties, secure a broad-based security pact and tackle barriers to trade.”

But trade expert Mr Henig told The Independent that Brexit is not yet behind us: “I’m afraid the story of Brexit carries on. The issues aren’t going away. We can’t leave it all in the past.”

So, what is the real cost of Brexit so far? Britain’s exit from the EU coincided with the outbreak of the coronavirus pandemic and lockdowns, from March 2020, which impacted economies globally. IEA economist Mr Jessop said that it is still too soon to judge the long-term costs or benefits of Brexit, adding: “At the aggregate level, it is impossible to separate out the impact of Brexit from other shocks, notably the pandemic and the energy crisis. For what it is worth, my own guess is that the UK economy is now about one per cent smaller than it would otherwise have been.” Even so, the UK’s GDP took the worst hit compared to all other G7 nations at the time; a 10.3 per cent drop in 2020.

In 2023, Bloomberg Economics estimated that the UK is suffering £100bn a year in lost output from leaving the EU. The economists Ana Andrade and Dan Hanson wrote that the UK committed “an act of economic self-harm when it voted to leave the EU”, with GDP four per cent smaller than it would have been without Brexit. In its latest forecasts alongside the new 2024 Budget, the Office for Budget Responsibility (OBR) estimated that UK trade will take a 15 per cent hit in the long term as a result of Brexit. The independent financial watchdog pointed to “weak growth in imports and exports over the medium term [which] partly reflects the continuing impact of Brexit”.

Sir Nick Harvey, the CEO of pro-EU think tank European Movement UK, is calling for a closer partnership with Europe to repair some of the economic damage from Brexit. “Being out of the European single market has now dented the British economy by more than 5 per cent, causing an annual shortfall in Treasury finances of almost £45bn. That equates to around a third of the basic rate income tax yield,” he told The Independent. “Our future prosperity and security demand a much closer partnership with Europe. The government’s ‘reset’ points in the right direction, but they need to go much further and much faster if we are to build a brighter future.”

A recent study from the Centre for Economic Performance at LSE found that goods exports from the UK dropped by £27bn in 2022 alone as a result of Brexit. Specifically, the study concludes that the UK’s trade cooperation agreement (TCA), implemented in January 2021, reduced UK goods exports (excluding services) worldwide by 6.4 per cent due to a 13.2 per cent fall in EU exports. The paper’s authors said that the drop in EU trade post-Brexit was due to the “introduction of new trade barriers under the TCA, rather than the uncertainty of the withdrawal process”.

The study suggests that 16,400 businesses – some 14 per cent of UK exporters — stopped exporting to the EU due to Brexit trade rules. Though Thomas Sampson, co-author and LSE economics professor, says that the hit to trade was “less than expected”, he also called the TCA a “disaster for small exporters”. Part of this is likely due to the increased complexity of new export regulations, which larger businesses are better equipped to absorb. Marks & Spencer’s chair has said that the retailer has had to rent a warehouse just to store paperwork. Mr Henig, director of the UK Trade Policy Project, said that figures show Britain has suffered more than the EU from the loss in trade. “Brexit has negatively affected our exports, more than our imports from the EU. It’s been easier for European importers to find alternate suppliers, than for UK importers to replace European suppliers.”