Five years post-Brexit, the UK faces significant economic challenges, particularly for businesses like Round Corner Brewery, which have seen export costs soar and sales drop. A study shows over 16,400 firms have ceased EU trading. While new trade agreements with non-EU countries have been limited, the UK remains a fintech hub. Economists predict a potential 4% reduction in economic growth, alongside declining investments and negative impacts on agriculture, with the government reluctant to revisit Brexit discussions.
The Economic Impact of Brexit: A Five-Year Review
Five years have passed since the United Kingdom officially departed from the European Union, and the economic consequences have been quite revealing. As discussions about rejoining the EU remain distant, the focus now shifts to the current economic landscape.
Challenges Faced by British Businesses
Combie Crayan, the founder of Round Corner Brewery, launched his business just before Brexit in 2018. At that time, exporting beer to countries like Ireland, France, Italy, and Spain was not only straightforward but also cost-effective. “We had a thriving market in Ireland,” shares Crayan, who operates the brewery in Melton Mowbray. Shipping a few crates used to cost just 20 pounds, even for distant destinations like Italy and Spain. “That’s no longer feasible,” he adds, highlighting the drastic changes that have taken place.
In addition to rising costs, the bureaucratic burden of paperwork has made exporting unprofitable. Consequently, the brewery’s sales in Europe have dramatically declined since the Brexit transition.
This struggle is not unique to Crayan’s brewery. A recent study by the London School of Economics revealed that approximately 16,400 British firms have ceased trading with EU partners. Many have had to pivot to alternative revenue streams, downsize their operations, or, in some cases, close their doors altogether.
Trade with the EU holds significant importance for the UK economy, as over 50% of British goods are exported to Europe. However, the services sector, which is becoming increasingly vital, has shown a degree of resilience amidst these challenges.
Faltering Trade Agreements and Economic Growth
Proponents of Brexit had long touted the potential for new trade deals with countries outside the EU, promising enhanced economic growth. However, the reality has not lived up to these expectations. So far, the UK government has managed to secure agreements only with Australia, New Zealand, and members of the Trans-Pacific Partnership (CPTPP).
A much-anticipated trade agreement with the United States remains elusive, and recent threats from US President Trump regarding tariffs and import restrictions cast further doubt on the future of UK-US trade relations.
Despite these trade losses, the UK remains a hub for fintech companies, demonstrating resilience even amid economic downturns.
Economists are beginning to recognize the long-term implications of these trade disruptions on economic growth. The Office for Budget Responsibility (OBR) estimates that Brexit could lead to a 4% reduction in economic growth over the medium term. Anand Menon, a professor at King’s College London, describes this as “a significant impact.”
Moreover, investment levels have plummeted since the UK’s exit from the EU. A recent report highlights the reduced access to funding from the European Investment Bank (EIB), which previously provided substantial financial support to UK projects. Following Brexit, the path to these funds has been obstructed, leaving British institutions to fill the gap with only a fraction of the EIB’s financing capabilities.
Farmers have also felt the sting of Brexit, with a survey indicating that 70% of respondents view its effects as negative. With fewer subsidies and the loss of key markets, many agricultural businesses are grappling with uncertain futures.
Despite the evident challenges, the government has not reconsidered Brexit. The Labour administration is wary of reopening discussions that could reignite old tensions and jeopardize electoral support, opting instead for a strategy that seeks to improve relations with the EU.