Brexit Loss of GDP Predictions

Claim: “Brexit will reduce long-run productivity (specifically, GDP per head) by 4% relative to remaining in the EU” (sometimes interpreted as a 4% hit to GDP)

Source: This was the initial assumption made by the OBR before the UK left

Methodology: The 4% figure was simply a crude average of the results of 13 external studies

Flaws: This is not original analysis by the OBR. The 13 external studies were all done before the final shape of the exit agreement was known. They also used a variety of different models and assumptions (most of which now look too pessimistic). Even then, 9 of the 13 studies suggested the impact would be less than 4%.

Claim: “both exports and imports will be around 15% in the long run than if the UK had remained in the EU”

Source: This was another assumption made by the OBR

Methodology: the 15% was based on the average estimate of a number of external studies that looked at the impact of leaving the EU on the volume of UK-EU trade

Flaws: The OBR’s 15% figure covered total trade in goods and services with the entire world, not just goods trade with the EU. A global shock of this magnitude had always looked implausibly large, and it has indeed failed to materialise

Claim: “Brexit is costing the UK £100 billion a year in lost output”

Source: Analysis by Bloomberg Economics published back in 2023. At the time, £100 billion was about 4% of UK nominal GDP (so this often confused with the OBR’s 4%)

Methodology: A simple “counterfactual” which assumed that if Britain had stayed in the EU then UK GDP would have tracked other G7 economies in exactly the same way as it did before the vote to leave

Flaws: For a start, this analysis is now three years out of date. More fundamentally, it assumed that Brexit was the only significant shock impacting any G7 economy in the period since the vote to leave in 2016, which is obviously nonsense (see the discussion of the NBER’s 8% figure in point 5 below)

Claim: “Forming a new customs union with the EU would boost the UK economy by 2.2% of GDP” or “the UK-EU reset would boost GDP by 2.2%”. This could equate to around £25 billion in additional tax revenues

Source: The 2.2% figure was drawn from a February 2025 report by the consultancy Frontier Economics, commissioned by the pro-EU campaign group “Best for Britain”. It has also been widely cited by the Liberal Democrats

Methodology: The report modelled “deep alignment” in both goods and services and suggested that this would increase UK GDP by 0.3%-0.4% over one year. The 2.2% was a ‘long-run’ estimate which simply extrapolated the one-year figures using some heroic assumptions about the links between trade intensity and productivity

Flaws: Many! The report modelled something that is simply not on the table - regulatory alignment based on ‘mutual recognition’, with the most favourable results assuming that this applies to both goods and services (so not, in fact, the same as a ‘customs union’). Even then the numbers are dodgy. Specifically, the report assumed that a one percentage point increase in trade openness would boost GDP by as much as 0.5-0.7%. That would be an implausibly large boost for an economy like the UK which is already relatively advanced and open.

Claim: “Brexit has already reduced UK GDP by as much as 8%”, with larger impacts on investment in particular

Source: An NBER working paper published in November 2025

Methodology: The 8% figure was derived by comparing growth in UK GDP per capita with the averages of several groups of other countries. These groups were assumed to be good proxies (or “doppelgängers”) for what would have happened to the British economy if the UK had remained in the EU. (Other variations of this approach have produced numbers of 5.5%, and even more than 10%.

Flaws: Crucially, the doppelgänger approach simply cannot separate out the impact of Brexit from the myriad of other factors that might explain why some economies have grown more quickly (or slowly) than the UK since 2016. For example, the US has benefited not just from relatively low energy but also from a large fiscal stimulus and the AI boom.

Care should be taken too when comparing the UK’s economic performance since 2016 to that of countries hit hard by the euro area debt crisis of the early 2010s. The numbers for Italy, Spain and Greece in particular have been flattered by catch-up growth. The 8% figure is implausibly large if you compare the actual performance of the UK economy to peers like France or Germany.

Claim: “Brexit has already reduced UK GDP by 6%”

Source: This figure also comes from the NBER working paper published in November 2025

Methodology: The 6% figure is based on firm-level data from the Bank of England’s Decision Maker Panel (DMP) survey. Any divergence in the performance of firms based on their pre-referendum exposure to the EU was assumed to be solely due to Brexit

Flaws: Several. The DMP is a relatively large survey, but the respondents are not necessarily representative of the UK economy as a whole. More importantly, divergences in the performance of individual firms depending on their exposure to the EU may simply be picking up the relative weakness of major European economies over this period (especially Germany), or other factors such as the impact of the UK’s relatively high energy costs on the competitiveness of goods which are mainly exported to the EU

Finally, while the prospect of an increase in trade frictions with the EU will clearly have had some negative effects, these should prove to be (mostly) temporary as Brexit uncertainty fades and firms adjust to the new trading arrangements.

Indeed, the DMP itself suggests that Brexit has dropped well down the list of concerns for most firms. Similarly, the latest Deloitte survey suggests that CFOs are now more worried about “economic weakness in the euro area and the possibility of a renewed euro crisis” than they are about the “effects of Brexit or a deterioration in UK-EU relations”.