Five years after Brexit. Was it worth it?

In January 2020 the UK officially left the European Union. The politicians who supported Brexit hailed it as a historic day for the country and one ripe with economic opportunity. Those who opposed the move feared the beginning of an era of significant economic decline.

Five years later, the truth is probably somewhere between those extremes, though it’s worth noting that a majority of the British public would vote to rejoin the bloc if the referendum was held again, according to polls.

It would have been a tumultuous five years even without Brexit, with the Covid pandemic and Russia’s invasion of Ukraine clouding the economic picture. Still, Brexit appears to have compounded those challenges, with one analysis revealing a £140 billion hole in the UK economy as a direct result of leaving the EU. 

But Brexit affected different sectors in different ways, and there is at least cautious optimism in some areas of the British economy. In the rest of this article, we’ll explore the post-Brexit economic landscape half a decade after the UK left the EU.

The British economy and Brexit: the wider picture

The post-Brexit Trade and Cooperation Agreement (TCA) went into effect on January 1st 2021, after a 12-month transition period. It immediately introduced new regulatory barriers, customs checks and rule of origin requirements between the UK and EU. 

The result, perhaps inevitably, was a drop in trade, with one report pricing the fall in goods exports from the UK at £27bn in 2022. Three years later, trade is still a concern.

"The trade picture remains grim for the UK five years after leaving the EU,'" says Dana Bodnar, economist at Atradius. 

The UK’s total trade in goods stands at 88% of its pre-Brexit level, and UK goods exports at just 82%. By contrast, EU trade volumes have rebounded and are now on a par with levels seen in January 2020. 

Beyond the EU: the UK and the world

Comparisons between the UK and EU don't tell the whole story. Pro-Brexit politicians promised that a UK economy free of what they regarded as the shackles of EU regulation would trade more easily with the rest of the world. But here, too, progress has been limited. 

"The UK now has 70 trade agreements in place," says Bodnar. "But the vast majority of these are essentially rollover agreements, honouring the trading terms from the EU’s existing agreements with third countries."

New agreements secured since Brexit include well publicised but modest deals with Australia and New Zealand. Negotiations with the US - the UK’s largest trade partner outside the EU - stalled under the Biden administration. Hope may be ignited by the inauguration of President Trump, but no deal is expected in the short term.

Perhaps most significant is the UK’s accession to the Comprehensive and Progressive Agreement for the Trans-Pacific Partnership (CPTPP), a trading bloc that includes 11 states spanning the Pacific Ocean. The deal has just come into force, and its impacts will only become apparent in the next couple of years. The short-term benefits of accession to the CPTPP are limited, as the UK already had bilateral trade agreements in place with 9 out of 11 of the CPTPP members. But it could bring more gains in the future as the trade bloc expands, especially with China (the UK’s second largest trade partner) formally applying to join.

While the economic environment is difficult for the UK, it is far from catastrophic. Analysts acknowledge post-Brexit obstacles, while finding encouragement in the UK’s openness to trade agreements and minimal foreign ownership restrictions.

Sector analysis: delays, worker shortages and tariffs

Industries have been impacted by Brexit in different ways and to different degrees, though usually negatively. Here are the effects on three major sectors of the UK economy.

Agriculture - labour shortages and post-Brexit checks

Up to now, UK agriculture has been most impacted by Brexit-related labour shortages. Brexit and the war in Ukraine have cut UK farmers off from a ready supply of seasonal workers. In a survey by the National Farmers’ Union (NFU), 40% of respondents reported suffering crop losses due to labour shortages. Additionally, significant crop losses during 2022/23 have been attributed to tight labour markets. 

In September 2024, the government announced a third postponement of post-Brexit checks on some fruit and vegetables imported from the EU, to address concerns about potential cost increases. The checks are now scheduled to begin on 1 July, instead of 1 January 2025. However, most fresh produce will be exempt from the checks.

Automotive - delaying Brexit impacts

One of the biggest potential Brexit-related impacts for both the UK and EU automotive sectors is yet to be implemented. The Brexit TCA stipulated that a 10% tariff would be applied on electric vehicles traded between the EU and the UK that failed to comply with new 'rules of origin' requirements. Due to start in January 2024, the requirements have now been deferred for a further three years.

"The addition of the 10% tariffs on EU- and UK-made EVs threatened to jeopardise the electrification of the European autos sector at a crucial time, just as it faced a number of challenges including rising competition from Chinese carmakers," says Nicola Harris, UK Senior Risk Underwriter for the Transport sector.

Chemicals - a major exporter faces challenges

The chemicals industry is a major ingredient in the UK’s economic mix and two thirds of production is exported, the majority to Europe. Without free trade access, 70% of the UK's exports to the EU face tariffs, and raw material imports from the EU will also be taxed.

"In addition, the UK's failure to develop a cost-effective regulatory regime to replace the EU system of chemicals registration has been challenging. This is increasingly affecting investment in the petrochemicals sector as companies navigate the uncertainties and costs associated with the regime," says Sarah Evans, UK Senior Risk Underwriter for the Chemicals sector.

The longer term

There are bright spots in the British economy, with sectors like aerospace, paper and packaging and renewable energy predicted to show resilience in 2025. The UK media industry is also set for significant growth. But industries with greater exposure to Brexit challenges – steel, logistics, construction – face greater uncertainty.

Brexit was about much more than economics, but from that perspective alone, it’s clear that Brexit has not – as yet – proved a success. UK trade remains subdued with both the EU and the wider world, and major sectors of the UK economy are suffering from cost increases, more complex bureaucracy and labour shortages that can all be attributed to Brexit.

Proponents of the withdrawal would argue that these teething troubles will iron themselves out over time, and that some of the drop off in trade is the result of the EU’s own economic challenges rather than Brexit. They also point to CPTPP and a potential trade deal with the US as reasons to be hopeful, alongside new IMF data which shows the UK as the fastest growing major European economy in 2025.

But even if the UK’s growth outlook for 2025 looks brighter than that of other major European economies, it remains below its 2% average annual rate prior to Brexit. The trade outlook, in particular, remains highly uncertain. On Brexit’s fifth anniversary, all we can say definitively is that its economic benefits have yet to arrive.