The impact of Brexit, in charts

Pragmatism calls for trying to make Brexit work better. It also requires an understanding of how much damage leaving the EU has done to Britain’s economy. After Britain formally left the bloc in January 2020 with a bare-bones trade deal, optimists clung to the hope that some of its poor performance was due to covid-19, and so would fade. Perhaps the disruption associated with new trade barriers would be short-lived, as traders got used to new arrangements. It is still too soon to assess Brexit’s long-run effects. But the evidence so far shows that it has hurt.

John Springford of the Centre for European Reform, a think-tank, tries to isolate the effect of Brexit by constructing a phantom country that tracked Britain’s performance before 2016’s referendum result. By using an algorithm to pick from a set of 22 countries rather than just selecting, say, a few economies of a similar size, he builds a plausible description of Britain’s path had it not voted to leave the EU (see chart 1). He estimates that by the second quarter of 2022, Brexit had hit GDP by as much as 6% relative to this counterfactual. Using the same method, he reckons that Brexit dragged down investment by 11%.

The effects on trade are a little more complicated. The latest data suggest that Brexit hasn’t had much effect on trade in services at all (though all estimates should come with the caveat that services trade is notoriously hard to measure). But it appears that Brexit had depressed Britain’s trade in goods by 7% by the second quarter of 2022.

These numbers are not gospel. Critics of Mr Springford’s model say that some of its comparator countries unfairly disadvantage Britain: Australia and New Zealand were more able to close their borders during the pandemic and avoid the worst effects of lockdowns; America became an energy exporter in 2019. They also point out that Britain’s productivity problem predated Brexit: it was already the worst performer on investment among G7 countries during the decade before the referendum. Mr Springford has argued in turn that his approach is better than cherrypicking countries based on rules of thumb. Whatever the precise scale of the hit, the overall message is clear: Brexit has made a bad situation worse.

Leaving the bloc has also pushed up the cost of living. A separate team of researchers from the Centre for Economic Performance, another think-tank, has analysed food products that were more or less likely to come from the EU, and conclude that Brexit increased average food prices in Britain by around 3% annually in 2020 and 2021. That is despite the fact that the British government has implemented only a subset of the import controls it promised, and repeatedly postponed the rest. If it ever implements the full suite of controls (the latest deadline is the end of 2023), such effects are likely to worsen.

Brexit has affected flows of people as well as trade. EU citizens went from being able to work or study in Britain as they pleased to having to secure visas first. This has had unsurprising effects. In the year to June 2022, immigrants to Britain from the EU represented only around a fifth of the foreign-born total, though some of that reflects large numbers arriving from Ukraine, as well as a special scheme for Hong Kong British nationals (Overseas). In 2015 EU citizens made up perhaps half of the total, though a change in methodology for calculating the figures in 2020 make comparisons tricky.

The public seems to have become less preoccupied by immigration as a result (though the influx of people arriving in small boats is driving it up the political agenda again). The share of people saying that immigration has a positive effect on the country rose from around 35% in February 2015 to 46% in July 2022, according to Ipsos, a pollster. In contrast, attitudes to the Brexit project seem to have hardened. In August 2016 the proportion of adults saying Britain was right to vote to leave the EU was 52%, just as it had been in the referendum two months earlier. Today that share is 43%. ■