The Office for Budget Responsibility estimates Brexit will reduce long-run UK productivity by 4% relative to remaining in the EU — equivalent to roughly £40 billion in additional tax revenue forgone since 2019. Goods exports to the EU sit 18% below their 2019 level in real terms. Around 440 financial services firms have relocated activity to the EU, moving approximately £900 billion in banking assets. Against these structural shifts, UK services exports have surged 19% above 2019 levels and business investment has reached record highs in early 2025. Five years on from the Trade and Cooperation Agreement, the UK economy’s post-Brexit trajectory is neither the collapse predicted by critics nor the liberation promised by advocates — but a set of structural divergences that will compound for decades.
The Quantified Cost: What the Evidence Now Shows
For the first five years after the Trade and Cooperation Agreement entered into force in January 2021, the principal methodological challenge in assessing Brexit’s economic impact was disaggregating it from the COVID-19 pandemic and subsequent global inflation shock. By 2025, with enough post-transition data to construct meaningful counterfactual comparisons, the picture has become clearer — and the headline numbers are significant.
The OBR’s March 2025 assessment — which incorporates nearly five years of post-TCA trade data — concluded its 2016 assumption of a 15% reduction in trade intensity ‘appeared to be broadly on track.’ UK trade intensity (imports plus exports as a share of GDP) remained 1.7% below its pre-pandemic level in Q3 2023; the rest of the G7 averaged 1.7% above their pre-pandemic baseline in the same period — a 3.4-percentage-point divergence. Goods trade between EU member states and between the EU and third countries grew by more than a third between 2019 and 2022; UK–EU goods trade grew by only around 10% over the same period. An ONS survey from early 2024 found that around half of UK exporting firms and two thirds of importing firms reported extra costs associated with the post-Brexit regulatory changes.
The NBER’s 2025 working paper by Bloom et al. — the most comprehensive firm-level econometric study to date, using the Bank of England’s Decision Maker Panel — estimates that Brexit reduced business investment by 12–18% relative to what it would have been. This is the largest quantified channel of impact: investment stagnated for five years after the 2016 referendum before returning to growth in 2024–25. The Centre for European Reform estimates the cumulative cost at approximately £40 billion in forgone tax revenue: ‘The 2019–2024 parliament raised taxes by around £100 billion, and if we take the OBR’s 4% loss of productivity to be the true figure, £40 billion of those tax rises were needed because of EU withdrawal.’ The UK’s Q4 2025 GDP was 5.2% above its pre-pandemic level, compared to 6.8% for the eurozone.
The Trade Paradox: Goods Down, Services Up
📦 Goods exports to EU (real): −18% below 2019 level in 2024 (House of Commons Library, 2025)
💼 Services exports to EU (real): +19% above 2019 level in 2024 (House of Commons Library, 2025)
💷 UK–EU trade deficit: £83.5bn (12 months to Sep 2025), down from £95.9bn (ONS Balance of Payments Q3 2025; GOV.UK Trade Stats)
Brexit’s divergent impact on goods and services trade is the defining structural feature of the post-2021 UK economy. UK goods exports to the EU fell sharply in January 2021 with the end of the transition period and have not recovered: in 2024 they remained 18% below their 2019 level in real terms. For EU investors and corporate strategists, the OBR’s explanation is the most consequential: the Trade and Cooperation Agreement eliminated tariffs on goods trade but did nothing to reduce non-tariff barriers. Rules-of-origin requirements, phytosanitary checks, customs documentation and regulatory divergence have imposed structural cost increases on goods exporters, particularly small and medium enterprises. About half of exporting firms and two thirds of importing firms report extra compliance costs (ONS survey, early 2024).
Services tell a different story. UK services exports to the EU reached 19% above their 2019 level in real terms in 2024, and services exports to non-EU countries were 23% above 2019 levels. This reflects the UK’s structural comparative advantage in financial, legal, professional and creative services — and the fact that the TCA’s coverage of services, while imperfect (financial passporting is excluded entirely), still permits substantial cross-border provision. In 2024, UK exports of goods and services to the EU totalled £358 billion (41% of all UK exports); EU imports into the UK were £454 billion (51% of UK total imports). The EU remains the UK’s largest trading partner by a significant margin, a structural reality that the ‘Global Britain’ strategy has not materially altered.
“The macroeconomic benefit of the new FTAs the UK has signed is very small, only offsetting the 4% loss from Brexit by about 0.2%. Even if a full FTA were signed with the US, that would rise to about 0.35%.” — John Springford, Centre for European Reform, 2025
The City of London: Resilient, Diminished — and Multipolar
🏦 Financial firms relocated: 440+ firms have moved activity to EU; £900bn in banking assets transferred (New Financial 2021; Bruegel 2025)
🇳🇱 Top destination: Dublin: 135 firms (25% of moves); Paris: 102; Luxembourg: 93; Frankfurt: 62; Amsterdam: 48 (New Financial: Brexit & The City 2021)
📋 Clearing equivalence: EU extended UK CCP equivalence until 30 June 2028; 90%+ of euro OTC derivatives still cleared in London (EC Decision Jan 2025; Bruegel 2025)
The financial services outcome is the most nuanced element of the Brexit economic story — and the most directly relevant for EU-based investors and institutions. The apocalyptic prediction of 75,000+ City jobs relocating to the EU has not materialised: estimates of actual relocations run at under 10,000 for financial services employment (Hamre and Wright, 2021; ScienceDirect, 2024). But the structural shift is real and cumulative: New Financial’s comprehensive analysis identified more than 440 firms that have moved something to the EU, with approximately £900 billion in banking assets transferred — roughly 10% of the entire UK banking system. Bruegel (2025) estimates approximately 40,000 jobs have relocated to Paris, Frankfurt, Dublin, Luxembourg and Amsterdam combined.
The relocation pattern is notably multipolar rather than concentrated: Dublin has emerged as the clear winner by firm count (135 firms, 25% of all moves) — driven by asset management, hedge funds and private equity; Frankfurt has attracted 60% of relocating banks; Amsterdam has captured nearly two thirds of trading platforms, exchanges and broking firms; Paris is positioned to win on employment. No single European centre has emerged to challenge London’s primacy — a structurally significant fact. London retains dominant position in euro-denominated OTC derivatives clearing: over 90% of interest rate swaps are cleared by the London Clearing House. The European Commission extended clearing equivalence until June 2028 in January 2025, the third such extension — a tacit acknowledgement that relocating this infrastructure to the EU remains technically and commercially impractical. The EU’s own Savings and Investment Union project (formerly Capital Markets Union) depends on London’s infrastructure for risk management that the EU cannot yet replicate internally.
Brexit Economic Scorecard: 2025 Assessment
| Indicator | Pre-Brexit (2019) | Latest Data (2024–25) | Assessment |
| GDP (OBR estimate vs remain scenario) | Baseline | ~−4% long-run productivity loss | On track for full 4% materialisation by ~2035 |
| UK goods exports to EU (real terms) | 2019 baseline | 18% below 2019 level in 2024 | Persistent structural gap |
| UK services exports to EU (real terms) | 2019 baseline | +19% above 2019 level in 2024 | Strong recovery; offset goods gap |
| Trade intensity (exports+imports/GDP) | Pre-pandemic baseline | 1.7% below pre-pandemic (2023) vs +1.7% rest of G7 | Divergence vs peers |
| UK–EU trade deficit | ~£95bn deficit | ~£83.5bn deficit (12m to Sep 2025) | Narrowing but structurally large |
| Financial services jobs relocated to EU | n/a | ~40,000 jobs; ~£900bn bank assets moved | Contained but cumulative |
| Business investment (vs referendum base) | Baseline | 12%–18% below what would have been without Brexit | Largest single channel of impact (NBER 2025) |
| New FTAs GDP offset | n/a | ~0.2% of lost 4% recouped | Minimal; even full US FTA would add ~0.35% |
Sources: OBR March 2025 EFO | NBER Working Paper 34459 (2025) | ONS UK Trade 2024–25 | House of Commons Library UK–EU Trade Statistics (2025) | New Financial (2021) | Bruegel (2025) | CER / Springford (2025).
Three Structural Tensions That Will Define the Next Phase
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The ‘Global Britain’ Gap: New FTAs Cannot Replace EU Proximity
The UK’s accession to the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) in December 2024 was the flagship milestone of the ‘Global Britain’ strategy. The OBR’s own estimate of its long-run GDP impact: 0.1% over 15 years. The Centre for European Reform’s assessment is equally sobering: all new FTAs signed by the UK since Brexit together offset approximately 0.2% of the 4% productivity loss — and even a full free trade agreement with the United States (not yet concluded) would raise that to approximately 0.35%. Geographic proximity, supply chain integration, and regulatory alignment create trade that no distant FTA can replicate at equivalent scale. UK exports to non-EU countries in 2024 were 14% below their 2019 level in real terms — indicating that the relative underperformance of UK goods trade is not EU-specific, but reflects a broader structural issue with UK goods competitiveness in the post-Brexit environment.
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The UK–EU Reset: Easing Frictions at the Margin
The May 2025 UK–EU Summit produced a ‘reset’ agreement that eased trade barriers on food and agriculture under a Sanitary and Phytosanitary (SPS) arrangement and created a framework for youth mobility and defence cooperation. Analysts assessed the trade benefit as real but limited in macroeconomic scale: ‘the UK government’s recent “reset” deal with the EU has eased some trade barriers, particularly for food and agriculture, but further progress is expected to be slow,’ according to Andrew Hunter of Moody’s Analytics (Euronews, July 2025). The TCA’s fundamental structure — no passporting for services, no customs union, no single market membership — remains unchanged. For the EU, the reset raises a different question: whether to formalise London’s role as a financial infrastructure hub for EU capital markets, or continue to pursue equivalence-by-extension while the EU’s own internal capital market deepening remains incomplete.
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Investment Recovery vs. Productivity Drag: The 2025 Turning Point?
The one substantively positive data point in the 2025 Brexit assessment is business investment: the ONS reported that gross fixed capital formation and business investment both reached record levels in Q1 2025, ending five years of stagnation. UK unemployment remained relatively low at 5.1% (Q3 2025), though payrolled employment fell 0.6% in November 2025 on an annual basis. But investment recovery does not immediately translate into productivity gains, and the OBR’s 4% long-run productivity loss forecast is not sensitive to a single quarter’s investment spike: it reflects the cumulative effect of lower trade intensity, less competition, and reduced knowledge transfer that compounds over the 15-year horizon to 2035. For EU investors assessing UK market positioning, the key variable is not whether the UK can grow — it can — but whether its productivity trajectory relative to the eurozone will diverge further, stabilise, or converge.
Conclusion: A Structural Divergence That Compounds Slowly
The 2025 evidence on Brexit’s economic impact is cleaner than at any point since the transition period ended. The OBR, NBER and NIESR converge on a range of 3–8% long-run GDP cost, with the OBR’s 4% productivity loss estimate providing the most policy-relevant anchor. The channels are now identifiable: goods trade barriers that have not been overcome by adaptation; business investment suppressed by uncertainty for five years; financial services relocations that are contained but cumulative; and a ‘Global Britain’ FTA strategy that offsets an estimated 0.2% of the 4% cost.
Against these structural headwinds, the UK’s services trade surplus, its resilient financial centre, and the 2025 investment recovery represent genuine strengths. For EU investors and policymakers, the strategic implication is dual: the UK remains a critical economic partner whose services, financial infrastructure and proximity make decoupling economically irrational for both sides. But the costs of the current architecture — non-tariff barriers, no passporting, clearing equivalence uncertainty — fall on both EU firms trading with the UK and on London’s capacity to serve as the EU’s external capital market hub. The post-Brexit economic relationship is not settled; it is in a slow, compounding structural adjustment that will continue to generate pressure for renegotiation on both sides of the Channel.
