Brexit at 10: UK economy still paying a steep price, says IfG

Ten years on from the Brexit referendum, Britain’s economy remains measurably smaller than it would have been had the country stayed in the European Union, according to a sweeping new assessment by the Institute for Government. The think tank’s analysis lands as politicians across the spectrum are once again debating whether the trade-offs were worth it — and the numbers don’t make for comfortable reading.

The cost in cold numbers

The IfG estimates that Brexit has reduced UK trade in goods by roughly 15% compared to a scenario where Britain remained in the single market and customs union. That’s not a projection or a forecast. That’s the gap researchers say has already opened up over the past decade. Business investment, too, has lagged persistently behind comparable economies, and productivity growth — already sluggish before the 2016 vote — has failed to recover in the way many economists had hoped it would.

GDP is estimated to be around 4 to 5% lower than it otherwise would have been. In practical terms, that’s hundreds of billions of pounds of lost output.

Services held up — but not enough

The picture isn’t uniformly bleak. The UK’s financial and professional services sector has proved more resilient than many predicted in the immediate aftermath of the vote. London has retained its status as Europe’s leading financial centre, though Amsterdam and Paris have both clawed back significant market share in areas like equity trading. So the warnings of a mass exodus of banks never fully materialised. But the steady drip of jobs and activity moving to EU cities has been real enough.

Agriculture and manufacturing have borne the brunt of new trade friction. Small exporters, particularly food and drink producers, have faced paperwork burdens and border delays that larger multinationals have been better equipped to absorb. Many simply stopped exporting to the EU altogether.

The labour market reshaped

Free movement ended, and the UK’s labour market shifted dramatically as a result. Net migration from the EU collapsed after 2020, replaced by higher inflows from non-EU countries. That’s changed the composition of the workforce in sectors like hospitality, construction and social care. “The economy has adapted, but adaptation has come with real costs that workers and businesses in specific sectors are still managing,” one senior economic policy analyst told reporters this week.

Wage growth in some low-paid sectors has accelerated — something Brexit supporters point to as a genuine benefit. Whether that outweighs the broader economic drag is a debate that won’t be settled cleanly.

What comes next

The IfG stops short of calling for a reversal of Brexit. But it argues that closer cooperation with the EU — on energy, on mobility for young workers, on regulatory alignment in key industries — could claw back some of the lost ground without reopening the most divisive political battles. Talks between London and Brussels on a new framework are ongoing, and both sides say they want progress by 2026. Whether that ambition survives contact with domestic politics remains the central question.