Brexit costlier than expected: UK economy faces deeper impacts

In the fall of last year, Tulip Siddiq, the Secretary of State for Economy in the UK Treasury, warned that 60% of the economic impacts of Brexit had yet to be realized.

Siddiq referred to forecasts from the Office for Budget Responsibility (OBR), which predict that in the long term, the British economy will shrink by 4% due to Brexit. Furthermore, foreign trade is expected to be 15% smaller compared to a scenario where the United Kingdom remained in the EU. Researchers from the London School of Economics also estimate that Brexit has impacted citizens' wallets, with barriers to importing food from the EU alone causing bills to rise by an average of £250 (about $305).

The referendum on the United Kingdom's exit from the EU was conducted in 2016, with nearly 52% of voters supporting leaving the bloc. The biggest opponents of the EU were English and Welsh voters, while the Scots and Northern Irish voted to remain.

Formally, Brexit took place on February 1, 2020. Since then, many institutions, including the government, have been examining how the separation from Brussels has affected the British Isles. "The Independent," citing Bloomberg Economics, reports that Brexit has led to losses of around £100 billion (approximately $122 billion) annually. Government estimates also indicate significant costs of settling with the EU, amounting to approximately £30.2 billion (about $37 billion).

Brexit has also impacted trade. The export of goods decreased due to the restrictions from the Trade and Cooperation Agreement (TCA) between the EU and the United Kingdom. The newspaper points out that changes in the agreement from 2022 alone led to a drop in export values by £27 billion (about $33 billion).

"The United Kingdom now faces significant trade barriers with its neighbors. It's something we will have to live with; we cannot overlook it. There will always be some issues," trade expert David Henig assessed.

Economist Julian Jessop, who was optimistic about Brexit, also noted that leaving the EU primarily impacted small businesses.

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." In his opinion, "the UK's leadership was destroyed," and the economy is in a worse state without any reputable authority able to refute it.

Brexit primarily affected three sectors negatively: food, agriculture, and fisheries. According to the Center for Inclusive Trade Policy (CITP), food exports to the EU have dropped by an average of £2.8 billion (about $3.4 billion) each year since the end of the transition period. A survey conducted by Arla Foods UK shows that one in 12 farmers in the dairy sector had to reduce production in 2024, and 56% of milk producers say that post-Brexit, and during the COVID-19 pandemic, it became harder to recruit workers.

Additionally, seafood exports have fallen by a quarter since 2019, from 454,000 tons annually to 336,000 tons in 2023. According to "The Independent," these are "striking statistics."

Brexit supporters claimed that leaving the EU would reduce migration. However, this did not happen; quite the opposite 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.

The newspaper adds that at least 3.6 million immigrants arrived in the UK between June 2021 and June 2024. Meanwhile, net migration (the difference between the number of immigrants and emigrants) amounted to 2.3 million during this period. In the first 12 months of Brexit immigration regulations being in force (until December 2021), net migration rose to 484,000, the highest level in the past decade.

Leaving the EU allowed the British to introduce changes in VAT regulations, which brought greater flexibility in fiscal policy. The new regulations allowed for the removal of the so-called "tampon tax" or the introduction of VAT on tuition in private schools (education in the EU is VAT-exempt). Since 2021, hygiene products — pads or tampons — have been exempt from the 5% VAT tax.

However, not everyone shares the same dissatisfaction. Jacob Rees-Mogg, the former minister overseeing Brexit opportunities and government efficiency in the UK, expressed that the EU is mired in excessive regulations, a situation the UK has managed to evade.