Economic context, trends and why trade matters

brexit-fact-base-london — Photo by is1003/Shutterstock

Economic context of the UK in 2024 was that it ranked globally:
- 6th in nominal terms
- 9th by relative purchasing power
- 33rd in output per capita
  - 18th in Europe in output per capita
  - more unequal than all other European economies, save Turkey and Bulgaria
Trade plays a critical role in the open UK economy
80% of UK economy is devoted to services; 10% to manufacturing
- despite this, manufacturing provided 44% of UK exports in 2024
UK economy has recovered to pre-pandemic levels but:
- since referendum, £ has weakened against $ and €
- Brexit trade barriers mean UK’s trade openness has declined
- services sector output has grown faster than manufacturing
UK has high employment but low labour productivity:
- real wage levels in 2024 are still below levels before the global financial crisis
- productivity growth slowed after the crisis of 2007/8
Brexit has hindered UK economy significantly
OBR has estimated the long-run impact as 4% of GDP for some time:
- equivalent to £116 billion based on 2024 GDP of £2.9 trillion
Reputable economists find a higher GDP impact, up to 8%:
- 5-6% (National Institute for Economic and Social Research, 2023)
- 8% (Goldman Sachs, 2024)
- 6-8% (National Bureau of Economic Research, 2025)
- most of which may already have happened
Main economic impacts are:
- reduced productivity
- lower exports and imports, by around 15%
- weak business investment
- labour shortages from reduced EU immigration
- positive impacts from:
  - higher non-EU immigration
  - trade deals with non-EU countries (but impact is immaterial)