8 years ago, voters in the United Kingdom were gearing up to take part in a monumental referendum that would determine whether or not they should remain a member of the European Union, or whether they should cut ties with the EU and go it alone and become independent.
While the results were incredibly close, 51.89% of voters decided that leaving the European Union and becoming independent would be the right decision to make. On January 31 2020, the UK officially left the EU.
Since the UK left the EU, it’s safe to say that things haven’t exactly been easy. New polls suggest that just 15% of Brexit voters believe that the benefits of Brexit outweigh the negatives.
Now, four years later, we want to look at the relationship between the UK and the EU and the economic impact that the new post-Brexit relationship may have on economies across Europe and beyond.
Unemployment Rates in the UK
Since Brexit, things have hardly been smooth sailing. Now, granted, we have seen a global pandemic, Russia invade Ukraine, rising energy costs, record inflation, and rising interest rates, but even so, Brexit still remains a factor.
Statistics have revealed that the UK currently has 1.8m fewer jobs in comparison to what it would have had if Brexit had not happened. This is a reduction of 4.8%.
In London alone, as a result of Brexit, there are estimated to be 290,000 fewer jobs than there would have been if the UK had remained in Europe and had not left the EU.
Two sectors in particular, that have been negatively impacted are the financial sectors and construction sectors. Put simply, there are fewer people working in these sectors as a result of Brexit. Needless to say, this is having a detrimental impact on the UK’s economy.
Budgetary Issues
Another post-Brexit impact of the UK leaving the EU is the fact that it is causing rising tensions between remaining EU members regarding their contributions to the EU budget.
Following the Brexit vote, the UK contributed 19.4 billion Euros to the EU budget. Following the removal of 7 billion Euros in EU subsidies for the UK, the EU’s budget saw a loss of around 5% of the total value.
To make up for this loss, other EU nations, including Germany, who already contribute the most, will be required to increase their contributions, which would be estimated to be around 2.5 billion Euros.
Since the UK left, tensions amongst other EU members have risen as there have been fierce debates sparked surrounding whether the budget should remain at 1% of the member’s combined GDP, as well as those who are calling for an increase, upping the contributions to 1.074% instead.
Trade Affected
Following the UK’s withdrawal from the European Union, tensions were high and the relationship was, shall we say, strained at best. The fact that trade has been negatively impacted will have done little to steady the ship and strengthen ties between the UK and EU.
The United Kingdom is now outside of the customs union and single market. Even though there are no tariffs on trade in goods with the European Union (subject to certain conditions) there are instead other barriers in place which are much higher.
Another issue surrounding trade between the UK and EU is the fact that Brexit has resulted in alterations to the way in which data on the trade of goods between the UK and EU is collected. Obviously with any tech-related changes, particularly ones as complex as those surrounding data and privacy, you can expect some level of disruption, not to mention an increase in expenditure.
Add to that, the effects of the Russia-Ukraine conflict, the COVID-19 pandemic, and the disruptions seen to other global supply chains, and you can understand why UK trade between the EU and other nations has been so negatively impacted.
Improvements in the Exports of Services
Thus far there has been little evidence to suggest that the UK leaving the EU could be deemed anything other than a financial failure. It isn’t however, all doom and gloom.
Expert analysis has found that UK exports of services to non-EU countries, as well as members of the EU, have recovered strongly since seeing such strong declines in 2020, driven largely by the pandemic.
Last year for example, it was found that UK exports of services to EU members were 9% higher than they were in 2019. Even more promising however, is the fact that exports to non-EU countries were 15% above the levels that they were in 2019.
EU Share of Trade to the UK
Another stat that economists and business analysts alike have been particularly impressed by, is the fact that the EU accounted for 42% of all UK exports last year. Despite the fact that this number has dropped from 47% which we recorded in 2010 and 2011, it is still a figure that has helped calm expert’s nerves.
As far as imports go, the figures also make for promising reading, as the EU accounted for 52% of all UK imports in 2023.
Between 2010 and 2020, this figure stood at 50% – 53%, though in 2021 – 2022 it fell to 47%. This was largely due to a reduction in goods imports from non-EU nations, particularly fuel, as an energy crisis was building.