A major new study led by King’s Business School has concluded that Brexit has left the UK economy significantly smaller than it would have been, with business investment suffering the sharpest decline. The research, conducted in partnership with Stanford University, the Bank of England and the University of Nottingham, draws on nearly ten years of economic data and thousands of responses from senior executives. It finds that by early 2025 the UK’s GDP was between 6% and 8% below the level it would likely have reached had the country remained in the EU.
The findings come at a time when concerns about sluggish growth, weak productivity and stalled investment continue to dominate economic debates in Westminster. The UK’s post-Brexit performance has repeatedly been compared with other advanced economies, and this study adds further evidence that the UK has fallen behind its peers since the 2016 referendum.
Business investment hit hardest after years of uncertainty
The study estimates that business investment is between 12% and 18% lower than it would have been without Brexit. Researchers describe Brexit as a “long and protracted shock” that triggered a sustained rise in uncertainty, leading firms to delay or cancel capital spending. More than half of UK firms listed Brexit as one of their top three concerns at key moments in the process.
Investment fell sharply compared with comparable economies after 2016, and the gap widened as firms continued to postpone spending on machinery, technology, infrastructure and R&D. Lower investment has directly contributed to slower productivity growth, restricting the UK’s long-term capacity for innovation and competitiveness.
Impact on productivity, employment and firm performance
Using data from more than 7,000 companies participating in the Decision Maker Panel (DMP) survey, matched with firm-level accounts, researchers found that employment and productivity were each 3% to 4% lower than their likely levels without Brexit. Productivity slowed in part because executives were spending significant time preparing for changing trading rules, diverting resources away from growth-driving activity.
The authors emphasise that although UK-EU trade volumes only began falling after the new trade agreement took effect in 2021, the earlier economic damage came from the prolonged adjustment period. They describe Brexit as a rare example of a major developed economy raising trade barriers — a “reverse trade reform” that allowed researchers to study its effects with unusual clarity.
Researchers say long-term economic costs are now clear
Professor Paul Mizen of King’s Business School said the length and unexpected nature of the Brexit process made it possible to track its economic effects in exceptional detail. He said the data shows “a steady accumulation of economic costs” including weaker investment, slower productivity and a smaller economy overall.
Professor Nicholas Bloom of Stanford University said that although some disruptions have eased, the long-term legacy is unmistakable: the UK economy is smaller than it otherwise would have been. Both researchers argue that understanding these impacts is essential for policymakers trying to revive growth, boost productivity and rebuild investor confidence.
The study adds to recent UK economic analyses that have highlighted weak business investment, falling competitiveness and a widening gap between the UK and similar advanced economies. Policymakers are now under pressure to outline a credible strategy to address these long-term structural challenges.
