“Brexit means Brexit,” said then British prime minister Theresa May.
What it came to mean in daily economic life, however, was more red tape, thicker bureaucracy and more customs officers poking their noses into people’s business — and then the negative economic and political consequences that follow from those three small protrusions.
Economists have a term for the cumulative effect: “drag” — the frictions that keep an economy from performing as well as it otherwise could.
It is not unlike aerodynamic drag, a concept Formula One devotees can talk about for hours.
There, tiny tweaks to the shape and angle of wings, fins and ride height can change a car’s performance.
The comparison works: if your car is less aerodynamically efficient than the rest of the grid — if it suffers more drag — it will not go as fast as the others, no matter how hard you stamp on the loud pedal, no matter how eye-catching your red, white and blue paint job.
Lose half a second a lap and, over 60 laps, you finish half a minute behind the winner.
The United Kingdom formally left the European Union on 31 January 2020
Swap the smooth contours of the EU single market for the rougher edges of “third country” trading rules — the regime that applies to countries outside the bloc — and drag appears. When that design change hits roughly half of your trade, the slowdown is no longer marginal.
Even with an extraordinary free trade deal, the reality is simple: it is still not as good as being inside the single market.
Brexit reduced UK GDP by 6% to 8%
Before the Brexit referendum, the argument was largely theoretical. Now there is a decade of economic data to study.
Like lap times for a national economy, those figures capture how small disadvantages compound — and the picture is bleak.
The most in-depth analysis of Britain’s post-Brexit economic performance is contained in a working paper published by the National Bureau of Economic Research in the United States.
Economists from Stanford University, the Bank of England, the German Bundesbank, King’s College London and the University of Nottingham carried out the work, testing and refining it through presentations to European and US central banks and universities.
Their headline finding: Brexit has reduced UK GDP by 6% to 8%, investment by 12% to 18%, productivity by 3% to 4% and employment by 3% and 4%.
They attribute the drag to “elevated uncertainty, reduced demand, diverted management time, and increased misallocation of resources from a protracted Brexit process”.
And they say earlier forecasts were “accurate over a five-year horizon, but they underestimated the impact over a decade”.
The famous red bus turned out to be utterly misleading
Over time, those seemingly small percentages turn into large sums — and the price of drag grows in cash terms.
Britain’s Office of Budget Responsibility (OBR), a watchdog akin to Ireland’s Fiscal Council, said in March that Brexit will reduce long-run productivity in the UK by 4% compared with remaining in the EU, largely because of non-tariff barriers.
The OBR also expects imports and exports to be around 15% lower in the long run than if the UK had stayed in the EU, while concluding that new trade deals have added virtually nothing to the British economy.
It had initially assumed net inward migration would settle at 129,000 a year after Brexit, but has since revised that projection up to 340,000 a year.
Any savings to the UK budget from leaving the EU, it argues, have been dwarfed by the loss of revenue linked to being outside the single market.
The famous red bus slogan — “Britain sends £350 million a week to the EU, let’s spend it on our NHS instead” — has turned out to be utterly misleading.
The Liberal Democrat Party says that, using the NBER figures, the UK government is losing £250 million a day in tax revenue because of Brexit.
Even at the lower end of the NBER estimates, the losses exceed the savings on EU membership fees.
House of Commons Library research cited by the Liberal Democrats, a pro-Rejoin party, suggests the UK Treasury is losing £60 to £90 billion a year in tax revenue because the economy is smaller than it would have been without Brexit.
Even the low-end estimate is substantial — enough, it notes, to cover the entirety of Britain’s defence spending and still allow increases to meet NATO rearmament needs that the government has struggled to fund.
The resignation last month of the Defence Secretary John Healy and his deputy Al Carnes pushed that funding pressure into sharper political focus.
Experts say Brexit is not the only cause of Britain’s economic malaise
The issue will return quickly: early July brings the NATO summit, and before that the British government is due to publish its long-delayed defence spending plan ahead of the meeting.
But the squeeze extends beyond the armed forces. Less money is less money, and the constraints spill into every department of state and every corner of the economy.
‘Brexit had a significant economic cost’
“There are big battles over public spending,” says Jill Rutter of the Institute for Government, a London-based think tank.
“We have the highest tax burden we’ve ever seen. We have increasing amounts that we’re having to spend on debt interest, which makes the public finances really in quite a sickly state.
“That’s all quite difficult, so we’ve seen the Chancellor having to come back for more a couple of times,” she said.
“Hopefully, she would have hoped before the Iran war, she wouldn’t have to come for more. Remember that if we go back to the Brexit referendum, the one of the very compelling arguments there was once the UK stopped contributing to the EU budget, there would be more money for UK public service, and that was certainly a message from the Leave campaign that really, really resonated.
“What didn’t really resonate as much was the warnings from the Remain side that the economic hit would massively outweigh the savings we were making on the budget contribution.
“Now, Brexit isn’t the sole cause of the problems of the UK public finances. We spent an awful lot during Covid.
“We then spent an awful lot to protect households from the effects of the energy price hike after the Russian full-scale invasion of Ukraine, but it certainly hasn’t made things any easier,” Ms Rutter said.
Jonathan Portes, a Professor of Economics at King’s College London, and a former chief economist at the Cabinet Office under Gordon Brown, also argues Brexit is only one contributor to Britain’s wider malaise.
“Well, the UK’s slow economic growth over the past 15 years is at the root of many of the problems we have at the moment, it’s at the root of problems about funding defence spending, about general political dissatisfaction, about problems in delivering public services.
Jill Rutter says tax revenue shortfall has political implications, including how Britain resets its EU relationship
“I think it would be wrong to say, though, that that’s all down to Brexit. There’s lots of other things going on, the [David] Cameron government’s austerity policies, the persistent failure of British businesses to invest enough, and of course, more recently, both Covid and the subsequent economic crisis, and right now, [Donald] Trump’s war in the Middle East, all of these have made a contribution, but clearly Brexit is one of the big factors that explains our current economic and political situation.”
Still, Prof Portes says the damage from Brexit — distinct from global shocks that hit nearly every country — is clear.
“I think it is reasonable to conclude that any reasonable comparison leads you to the conclusion that Brexit has had a significant economic cost.
“You can get numbers as low as 2% of GDP or numbers as high as 8% of GDP, and in my view, a realistic amount is about 4 or 5% of GDP, that’s between 120 and 150 billion pounds a year”.
“And the government takes roughly a third of that in tax revenue. So that’s the hit – the drag on the economy and the drag on the public finances.
“Brexit has, as was predicted, done significant economic damage to the UK. It hasn’t been a catastrophe,” Prof Portes said.
“There was no crisis, but it has been a slow-burning drag on the economy” is how he sums up Brexit’s economic impact.
“So, estimates vary quite a lot, and there’s plenty of room for debate, but I think it’s reasonable to say that Brexit has cost the UK perhaps 4 or 5% of its GDP, and if we’re to put that into billions per year, so we can say that as a result of Brexit, the UK is maybe 100-150 billion pounds a year smaller as a result of Brexit.
“That, of course, also has implications for tax revenue; that would mean that the UK government is getting about 40 to 60 billion pounds less a year in tax revenue,” he added.
As Ms Rutter notes, that missing revenue feeds directly into politics — including how Britain attempts to reset its relationship with the EU.
On 23 June 2016, David Cameron walked out the door of 10 Downing Street to the lectern to deliver his resignation statement
“The government now says it wants a closer relationship with Europe. Keir Starmer is talking about the UK, putting the UK at the heart of Europe, though the government still feels that it’s constrained by the red lines it set out in its manifesto, which basically limits your ability to deliver a significant economic uplift from a closer trading relation with the EU.
“If you don’t want to be part of the single market, don’t want to be in the customs union, don’t want to be a member of the EU, because you don’t want to accept freedom of movement, then you actually can’t do very much through a close relationship with the EU to boost the economy, boost some sectors.
“So, if we do the sanitary and phytosanitary deal, then that will undoubtedly be good for our agri-food industries.
“They will be able to export more easily again, good for those fishers who export, I suppose, those who benefit from the extra quota.
“So, there will be some localised benefits, but it is not a giant boost to the economy. The thing is, though, that in terms of immediate boost the economy, if the UK announced today that it wanted to reapply to rejoin the EU, it’s not going to do that, but even if it did, that would still be quite a long way off before that actually happened,” she said.
Professor Anand Menon, who leads the UK in a Changing Europe project at King’s College London – a sort of Brexit observatory – said: “It impacts everything, really, because most of the government structural fundamental problems are, as is quite common with governments, about money.
“The government doesn’t have the money to fund what it would like to do on defence.
“At the same time, it’s very politically difficult to cut things like the National Health Service or welfare spending, which take up such a large part of government spending, so you end up boxed in everything you do has a severe political downside in a way that simply would not be the case if I mean these decisions are always difficult regardless of the fiscal position, but they’re a lot more difficult than they would have been if the economy was three or 4%,” bigger, Prof Menon said.
It is not the car, it is the driver
In motor sports, when a car fails to perform, teams grind through the slow work of engineering fixes — wind-tunnel testing and virtual simulations — making dozens, sometimes hundreds, of incremental changes to the setup.
A strong driver can help accelerate that process. Sometimes, though, the driver is replaced.
In Brexit Britain, the instinct has often been to swap drivers rather than do the hard work in the engineering labs — an irony for a country that sits at the heart of the Formula One industry and employs some of the world’s best automotive engineers.
On the morning of 23 June 2016, David Cameron stepped out of 10 Downing Street to the lectern and resigned. Yesterday, Keir Starmer did the same.
Watch: British Prime Minister Keir Starmer announces resignation
Between them came Theresa May, Boris Johnson, Liz Truss and Rishi Sunak. Andy Burnham looks set to become the seventh British Prime Minister in the 10 years since Brexit.
Count the seven prime ministers before Mr Cameron and the line runs back to 1964 and Harold Wilson’s first government.
In roughly the 305 years since Robert Walpole first held the job, Britain has had 58 prime ministers — six of them since 2016.
That is close to 10% of all office holders compressed into about 3% of the time the office has existed, a stark indicator of the political instability Brexit has helped unleash.
For decades, British politicians and journalists mocked Italy and Belgium for frequent leadership turnover. By that yardstick, Brexit may have made UK politics more “European”.
The UK’s party fragmentation — including the rise of Reform UK, Restore Britain, the Green Party and regional nationalists — also fits a familiar European pattern.
Trying to manage that reality through a two-party, first-past-the-post electoral system intensifies pressure, and fuels frustration among voters who feel unheard.
After all, Keir Starmer led Labour to a huge parliamentary majority on only a third of the vote.
Two-thirds of voters in 2024 did not want a Labour government — yet they got one of the biggest majorities ever, and have now watched the leader who delivered it get sacked.
But removing the driver does not change the drag coefficient built into the car.
Until Team UK engineers find ways to reduce the Brexit-related drag, prime ministers will keep confronting the same constraint: less money to deliver promises, and no quick fix.
