Brexit's billion-pound blow: The shrinking UK economy

Last fall, the UK's Secretary of State for Economy at the Treasury, Tulip Siddiq, cautioned that 60% of Brexit's economic impacts had yet to manifest.

Siddiq referred to forecasts from the Office for Budget Responsibility (OBR), which predict that in the long term, the British economy will contract by 4% due to Brexit. Meanwhile, foreign trade is expected to be 15% smaller than if the United Kingdom had remained in the EU. Researchers from the London School of Economics also estimated that Brexit has taken a toll on citizens' wallets, with new barriers to importing food from the EU alone causing bills to rise by an average of £250 (about $425 CAD).

The referendum on the United Kingdom's exit from the EU was held in 2016, with nearly 52% of voters supporting the decision to leave. The strongest opposition to the EU came from English and Welsh voters, while Scots and Northern Irish voters opted to remain.

Formally, Brexit took place on February 1, 2020. Since then, multiple institutions, including the government, have analyzed the effects of this separation from Brussels on the British Isles. "The Independent," citing Bloomberg Economics, reports that Brexit has resulted in losses of approximately £100 billion (around $170 billion CAD) annually. Government estimates also indicate significant costs associated with settling with the EU, amounting to approximately £30.2 billion (around $52 billion CAD).

Trade has also been significantly impacted. The export of goods has decreased due to the restrictions imposed by the Trade and Cooperation Agreement (TCA) between the EU and the United Kingdom. The newspaper points out that revisions to the agreement in 2022 alone led to a decline in export value by £27 billion (about $46 billion CAD).

Economist Julian Jessop, while initially optimistic about Brexit, admitted that leaving the EU has primarily affected small businesses negatively.

Jessop, as reported by The Independent, pointed out that the UK's exit from the EU has clearly harmed the economy, notably through reduced trade, decreased business investments, and labor market disruptions.

Meanwhile, former Deputy Prime Minister Lord Michael Heseltine declared that "Brexit is a historic disaster." He argued that "the UK has lost its leadership," and the economy is weaker, with no credible authority to dispute this.

Brexit has primarily adversely affected three sectors: food, agriculture, and fisheries. According to the Centre for Inclusive Trade Policy (CITP), food exports to the EU dropped by an average of £2.8 billion (about $4.8 billion CAD) annually since the end of the transition period. Meanwhile, a survey conducted by Arla Foods UK indicates that one in 12 dairy farmers had to reduce production in 2024, and 56% of milk producers report that post-Brexit and during the COVID-19 pandemic, it became more difficult to recruit workers.

Moreover, seafood exports have fallen by roughly 26% since 2019, declining from 454,000 tonnes annually to 336,000 tonnes in 2023. According to "The Independent," these figures are "striking statistics."

Brexit proponents claimed that leaving the EU would reduce migration; however, the opposite has occurred.

According to The Independent, Brexit led to an unprecedented rise in net migration to the United Kingdom. Despite new immigration policies, the flow of newcomers has continued, casting doubt on previous assurances. Additionally, a considerable segment of the population views Brexit as a misstep.

According to the newspaper, at least 3.6 million immigrants arrived in the UK between June 2021 and June 2024. Net migration (the balance between immigrants and emigrants) amounted to 2.3 million during this period. In the first 12 months following the implementation of Brexit immigration regulations (until December 2021), net migration surged to 484,000, the highest level in a decade.

Although leaving the EU allowed the UK to implement changes in VAT regulations, bringing greater flexibility in fiscal policy, the new regulations enabled the removal of the "tampon tax" and implementing VAT on tuition for private schools (education is VAT-exempt in the EU). Since 2021, hygiene products such as pads and tampons have been exempt from the 5% VAT.

Not everyone is dissatisfied, though. Jacob Rees-Mogg, former minister responsible for Brexit opportunities and government efficiency in the United Kingdom, stated that the EU is "caught in a regulatory quagmire, which we are avoiding."