Six years down the line of historic “Brexit,” the incident that marked United Kingdom’s exit from the European Union (EU), the British economy has taken a 6% hit from the phenomenon’s effects, according to economists’ analysis of an internal Bank of England (BoE) data about the decisions, views and financial results of thousands of British companies since 2016, when the European country successfully concluded its referendum.
Examining data that the bank uses to decide on interest rates, the BoE study analyzed lost growth by trying to reconstruct how the United Kingdom would have grown if it had not voted to leave the EU, reported the BBC.
“The report found that about half the economic hit came from the sheer surprise and uncertainty of the post-referendum period, while the rest was from rising trade barriers after the UK left the customs union and single market in 2021,” the BBC noted.
However, as per some critics, the study does not fully account for the outperformance of the American investment and tech industries or the 2022 European energy shock.
Co-author of the study, British professor Nick Bloom from Stanford University, told the BBC that the British economy was growing fast in the years before Brexit and could have at least partially kept up with the United States without the disruption. As per him, the Bank of England company data offered important corroboration.
His paper concludes: “In the case of Brexit, there was a substantial economic impact on the United Kingdom, but it arose gradually over the subsequent decade.”
The study’s timing is equally crucial, as the central bank’s top officials, in recent months, have been explaining the economic consequences of Brexit.
Recently, the bank’s governor, Andrew Bailey, while talking about the consequences of Brexit, told the media, “I think the level of activity and growth in the economy has been lower. And the reason for that is that if you reduce the size of the markets that we trade with, so we reduce our export markets, then that does tend to have a negative impact on growth.”
While noting that the British economy’s productivity and the market size have also been affected, Bailey said, “Although the impact on financial services was not good, it was nowhere near as detrimental as many people predicted at the time.”
The latest version of the study, which got published just ahead of the 10-year anniversary of the 2016 referendum, used the company data alongside five more traditional analysis methods. While the company-level data point to a 6% hit over 10 years, the wider studies suggest an average of 8%.