UK Grapples with Brexit’s Economic Fallout as Calls for Closer Ties to EU Grow
Six years after the UK formally exited the European Union, a growing chorus of voices acknowledges the economic damage inflicted by the decision, prompting a cautious re-evaluation of the relationship with Brussels. While a full return to the EU remains politically fraught, the current government is signaling a willingness to explore closer alignment, driven by mounting evidence of Brexit’s failures.
Economic Decline: A Stark Reality
The economic consequences of Brexit are becoming increasingly undeniable. A recent study by the National Bureau of Economic Research found that the UK economy has contracted by 8% compared to what would have been expected had the country remained within the European bloc. The report detailed significant declines in investment – between 12% and 18% – as well as employment (down 3-4%) and productivity (also down 3-4%). As one analyst noted, “The economic blow has been enormous and resounding: the UK is demonstrably poorer as a result of Brexit.”
The financial strain is evident in public accounts. According to a report from the House of Commons Library, the annual cost in lost tax revenue due to decreased productivity and employment amounts to £90 billion – 8% of the UK’s GDP. This shortfall has necessitated historic tax increases, equivalent to roughly £3,000 per person, yet public services continue to struggle. The promise by former Prime Minister Boris Johnson to “save £350 million a week” by ending contributions to Brussels has been widely discredited; saving £18.2 billion annually pales in comparison to the £90 billion lost.
Immigration Fails to Fall, Despite Brexit Promises
One of the central arguments for leaving the EU was to control immigration. However, the reality has been the opposite. Annual net immigration surged from approximately 800,000 before the exit agreement to over 1.3 million in both 2022 and 2024, peaking at 1.5 million in 2023. While net immigration figures are decreasing, this is largely due to a significant increase in emigration of British citizens – rising from 500,000 to 700,000 annually.
Broken Promises and Economic Disadvantage
The ambition to decouple the UK economy from the EU has largely failed. Promised trade deals have not materialized, and future prospects appear dim, particularly with the potential return of Donald Trump to the White House and his protectionist trade policies. The anticipated regulatory freedom has proven illusory, with the UK largely replicating or maintaining EU regulations to protect trade with the bloc.
Economically, the UK now lags behind its former partners. Since 2020, the Eurozone’s GDP has increased by 6.4%, compared to 5.3% for the UK. Inflation has also been higher in the UK, reaching 28.25% compared to 22.82% in the Eurozone, according to various statistical agencies. .
Political Realities and Potential Pathways Forward
The Conservative Party, which championed Brexit, is currently at its lowest point in parliamentary representation and faces consistently low polling numbers. The Labour Party, while historically opposed to leaving the EU, is now navigating a complex political landscape. Having pledged not to rejoin the single market or customs union during the last election, their room for maneuver is limited, a position many of their voters find insufficient.
Prime Minister Keir Starmer has focused on aligning the UK with select EU regulations and seeking re-entry into structures like energy connections and the Erasmus student exchange program. “To achieve economic renewal, we must continue to reduce friction, we must continue to move towards a closer relationship with the EU, and we must be mature enough to accept that this will require concessions,” Starmer stated last week. However, the potential growth offered by these incremental steps is minimal, estimated at less than 1% of the UK’s GDP. The vast majority of the 7% GDP loss is tied to the customs union and single market.
“It’s striking how often the Chancellor and the Prime Minister lament the costs of Brexit without offering any ideas on how to change the status quo,” criticizes Joël Reland, a researcher at the UK in a Changing Europe think tank. “If what you want is growth, as the government says, rejoining the EU is the easiest path. Most economists agree. The problem is political.”
Shifting Public Opinion
Recent polls indicate growing support for rejoining the EU, though the margin varies significantly – from 17 percentage points in some surveys to just 4 in others. There is a clearer consensus around the desire for a “closer relationship” with the EU, with 55% in favor and only 30% opposed, according to a recent Opinium poll.
The challenge lies in the political sale. The Labour Party fears losing support in areas that voted for Brexit if it proposes a return to the single market. However, Deputy Prime Minister David Lammy has begun to open the door, stating, “Our future is inextricably linked to the EU and we should deliberately work in the coming years to be closer.” He pointed to countries like Turkey, within the customs union, as examples of economies benefiting from such arrangements.
A Divided Political Landscape
The political landscape is now clearly divided. Both the Conservatives and Reform, the party of Brexit architect Nigel Farage, advocate remaining outside the EU. Conversely, the progressive bloc of the Liberal Democrats, the Greens, and nationalist parties from Wales and Scotland support a return to the club. The key question remains what the Labour Party will do, particularly if Starmer, leading a potentially unstable government, faces increasing discontent within his ranks in the coming months.
Ultimately, the great tragedy of Brexit was the refusal to accept compromises. Johnson’s plan to “have cake and eat it” – demanding the rights of membership without the obligations – proved a resounding failure. The trauma of those years continues to haunt current politicians, who fear reopening a divisive debate. But the growing certainty that the decision was a mistake suggests that it is only a matter of time before a political leader concludes that publicly advocating for re-entry could garner more votes than it costs.
