The authors used firm-level evidence from the Bank’s Decision Maker Panel, a survey of British companies that tracks business expectations, exposure to Brexit and reported economic effects. The Bank normally uses this data to inform monetary policy decisions, including interest rates.
In this case, the researchers matched years of company responses with changes in firms’ financial accounts to assess how Brexit affected corporate performance.
Why the paper stands out
There have been many attempts to measure Brexit’s economic impact, but this is the first time key Bank of England data on the UK corporate sector has been used in this way.
That matters because the Decision Maker Panel was created by the Bank of England in 2016 specifically to improve understanding of Brexit’s economic consequences. Convenient, given the subject matter.
The latest version of the paper combines the company-level data with five more traditional economic methods. The firm data points to a 6% hit to the economy over 10 years, while the broader set of methods suggests an average loss of about 8%.
The study was co-authored by Nick Bloom, a British professor at Stanford University, and economists at the Bank of England. The authors had access to the Bank’s data, though the paper carries the standard disclaimer that “the views expressed do not necessarily represent those of the Bank of England”.
What Nick Bloom says about the findings
Bloom argues that the UK was growing strongly before the referendum and could have at least partly kept pace with the United States without the disruption caused by Brexit.
He said the Bank’s company data provides important supporting evidence because it draws on what firms said they were experiencing, how exposed they were to Brexit and how their finances later changed.
The 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”.
That point is central to the study. The argument is not that Brexit caused one sudden collapse. It is that uncertainty, weaker investment and new trade barriers steadily reduced the level of economic activity compared with the path the UK might otherwise have followed.
Why some economists remain sceptical
Not everyone accepts the scale of the estimate. Some policy economists argue that modelling how the UK would have performed without Brexit is extremely difficult, especially during a period that also included major global shocks.
Critics say the study may not fully account for factors including:
- The unusually strong performance of US investment and technology sectors
- The European energy shock four years ago
- The wider disruption from global crises affecting all advanced economies
Their concern is that comparisons with other economies can exaggerate Brexit’s role if those economies benefited from separate advantages or suffered different shocks.
That does not erase the trade effects identified by the paper, but it does explain why estimates of the Brexit hit vary. Measuring a path that was never taken is useful, but it is not the same as reading a meter.
What the Bank has said
The study arrives as senior Bank of England officials have become more direct about Brexit’s economic consequences in speeches and interviews.
Bank governor Andrew Bailey recently told journalists that, because of Brexit: “I think the level of activity and growth in the economy has been lower.”
He explained the mechanism in plain terms: “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.”
Bailey also said productivity and market size had been affected. On financial services, however, he said the impact was “not good” but “nowhere near as detrimental as many people predicted at the time”.
That distinction is important. The Bank is not saying every forecast of Brexit damage was accurate. It is saying the overall level of activity has been lower because the UK made trade with major markets harder.
Where UK-EU policy goes next
The findings were published just ahead of the referendum’s 10-year anniversary, at a time when the government is looking for practical ways to ease parts of the post-Brexit settlement.
Prime Minister Keir Starmer has announced that he will meet EU counterparts at a summit in July to seek agreements on food and farm exports, electricity and emissions trading. Further cooperation and regulatory alignment are also expected to be discussed.
Those talks will not reverse Brexit. They may, however, reduce some of the operating costs created by the current arrangements, particularly for sectors exposed to border checks, standards rules and energy market coordination.
The BBC has asked political parties for comment.
