Sunday Times Economics Editor, David Smith has claimed that slower UK growth over recent years is due to Brexit, with the UK having generally outperformed other European economies before 2016. But his analysis is misleading. The UK’s growth performance slowed sharply around the time of the global financial crisis, years before Brexit, and has been further hit since 2016 by soaring energy prices, the run-down of the oil and gas sector, and pandemic-driven labour market damage. Recent weak growth relative to the US, meanwhile, may be traced to very different fiscal policies and the US AI boom. Brexit plays a small, if any, part in this story.
In a recent article in The Times, David Smith claimed that the UK’s recent growth performance should be considered a failure because pre-Brexit, the UK generally grew more strongly than the other EU economies. It is instructive to quote him at length:
“Labour politicians are justified in laying some of the blame for the UK’s slow growth on Brexit as has the OBR. When it comes to assessing the damage from Brexit one irritating thing is that when people say it cannot have been that bad because since 2016 the UK’s economic growth has been in line with the big European economies, similar to France a little faster than Italy, better than Germany. Such claims ignore the history which is that before the leave vote achieving the growth rates of the big European economies would have been regarded as a failure. From 1993 and the dawn of the Single market until 2016 and the Referendum, UK GDP (Gross Domestic Product) grew by 66%, almost half again as France, nearly double Germany’s growth and about five times that of Italy. Had that performance with respect to France continued since 2016 the UK would have grown by 17% not 12%, which sounds a lot but is just over 1.6% a year. The loss of growth is all the clearer in the figures for GDP per head post -2016 with the UK comfortably outgrown by Italy, Spain, France and the Eurozone, with the huge increase in post-Brexit increase in non-EU immigration a factor as well as weak UK growth.
Smith’s arguments are misleading, relying on a mixture of cherry-picking of data and poorly supported assertions. The first problem is his argument that the UK outgrew the big European economies consistently from 1993-2016. This simply isn’t the case.
It is true that the UK easily outgrew the eurozone from 1993-2005, by on average 1 percentage point per year. But from 2006-2011 it grew more slowly, by 0.4 percentage points per year. In 2012-2014 the differential became positive again, in large part due to the eurozone financial crisis, but by 2015 the UK and eurozone were growing at around the same pace, and this has remained the case since (see Chart 1).
Source: ONS, Eurostat
So the UK’s relative growth performance in the decade before the Brexit referendum was patchy. Smith assumes the earlier 1993-2005 period or the short 2012-2014period were somehow the ‘norm’ which would have continued in the absence of Brexit, but there is no reason to assume that is the case. Indeed, there are very strong reasons for believing otherwise. Specifically, the factors underlying the UK’s growth outperformance versus the eurozone in 1993-2005 had largely played out by 2016. The negative impact of the Eurozone crisis on EU economies had also largely gone by 2014.
The key driver of the UK’s strong growth performance in 1993-2005 was robust productivity growth, which ran at around 2% per year with the trend consistently stronger than in France, Germany, and Italy. But the UK productivity growth trend started to slow notably around the time of the global financial crisis of 2007-2009 and had converged with that of the big Eurozone economies by 2011. By the time of the Brexit referendum in 2016, the UK productivity growth trend was clearly below that of France and Germany. With productivity growth having slowed so much it would have been very difficult for the UK to maintain a substantial positive GDP growth differential versus the Eurozone (see Chart 2).
Source: ONS, Eurostat
Nor is Smith correct when he implies that the UK’s strong relative growth performance in the 1990s and early 2000s was due to the EU Single Market programme. As we have noted before, the evidence simply does not support this notion. If it were so, the UK’s exports of goods (with which the Single Market programme was overwhelmingly concerned) should have grown strongly – but they didn’t. UK export volumes to the EU barely grew at all from 2001 to 2016 – in the month of the Brexit referendum they were just 1% higher than the same month 15 years earlier (see Chart 3).
Source: ONS
The real drivers of growth in the pre-Brexit period were exports to non-EU destinations, which grew by 60% from 2001-2016 and, up until the financial crisis at least, a booming financial services sector and rapid growth of household credit including housing equity withdrawal which fuelled consumer spending.
These latter two factors dried up as sources of growth after the financial crisis: the financial services sector went from contributing as much as one percentage point of annual UK growth to being a drag, while housing equity withdrawal fell from as much as 4-6% of post-tax income into negative territory as households switched to deleveraging (see Chart 4).
Source: ONS, Bank of England
Clearly then, Smith’s vision of a dynamic outperforming UK economy in 2016 is wrong. In reality, the UK economy was suffering from a major productivity slowdown and suffering with major negative overhangs from the global financial crisis. But what about more recent years?
Some of negative structural changes from the financial crisis are still with us. Housing equity withdrawal remains negative, so that even if house prices rise, this doesn’t translate into stronger consumer spending the way it once might have. On top of this, the UK economy has laboured under the pressure of other factors – mostly policy-induced.
As we have previously shown, UK industrial energy prices have soared to double the EU median level, undermining the UK’s energy-intensive industries. In addition, the UK has deliberately run down the high productivity, export-oriented oil and gas sector (whose exports to the EU are down a third by volume since 2019).
On top of this, the pandemic seems to have induced a substantial negative labour supply shock. The UK’s labour participation ratio (the share of the working age population in work), which had been on a strong upward trend from 2010-2019, fell by 1.5 % points from January 2020 to February 2026, from 76.5% to 75% (see Chart 5).
Source: ONS, Department of Energy & Net Zero
These shocks are together a much more credible explanation for the UK’s recent sluggish growth than Brexit, especially as they have hit a broader area of the economy.
The downward shock to the labour participation ratio alone could have cut 1% from potential GDP (using a standard production function), while the drop in oil output since 2016 amounts to 0.8% of GDP and rise in industrial energy prices may have cut 0.6% from UK GDP just based on the slump in output in highly energy-intensive industries. Altogether then, these shocks may have cut 2.5% from UK GDP, with this probably being an underestimate.
Smith and other Brexit opponents generally ignore these shocks and continue to claim that the main negative influence on UK growth since 2016 has been Brexit, which they claim has hit the economy hard via weaker trade, investment, and productivity. But the evidence simply doesn’t match this claim.
The UK’s total exports of goods and services have continued to grow since 2016, thanks to a very strong performance by services, to a level only very slightly below an extrapolated trend from 2007-2018. Smith’s attempt to claim the opposite by comparing the current level of exports with that of Q4 2019 is a case of extreme cherry-picking as sales in Q4 2019 were upwardly distorted by exporters bringing forward sales in anticipation of the UK leaving the EU customs union and single market (see here for ONS estimates of this effect from the import side).
Similarly, the supposed hit to UK productivity from reduced economic ‘openness’ that Smith and others (notably the OBR) continue to claim has occurred does not square with the actual data which show no decline in economic openness but rather a rise by 3% of GDP since 2016 (Chart 6).
Source: ONS
Meanwhile, UK business investment has continued to grow in line with its long-term trend pace and faster than in Japan, Canada, or Germany. Again, claims of a negative Brexit impact are based on cherry-picking data – misleadingly suggesting that the strong cyclical upswing of 2013-2016 would have continued forever without Brexit (see Chart 7).
Nor is it true that Brexit has hit UK FDI, at least not the most productive element of FDI which is greenfield investment. This has continued to run at rates much stronger than in the major EU economies – around $70 billion per year on average in 2019-2024 in the UK versus $20-$40 billion in France, Germany, Italy and Spain (see UNCTAD here).
Source: ONS
Given the structural overhangs from the global financial crisis and the further complex of largely self-inflicted shocks since 2016, it is arguably surprising that the UK has even managed to keep growing at a similar pace to the main European economies. Certainly, the notion that the UK might, in the absence of Brexit, have grown at a similar pace to the US – a notion implied by some analyses that claim UK GDP is 6-8% lower thanks to Brexit – looks entirely fanciful.
Aside from the issues mentioned above, there are a number of other reasons why UK growth has lagged that of the US over recent years. The first of these is that the period of catch-up in productivity levels in the market service sector came to an end around 2007 (see Fernald and Inklaar here).
In addition, while the US has engaged in a strong fiscal expansion since 2022, with the cyclically adjusted budget deficit expanding from 4% of GDP to around 8% of GDP, the UK has been tightening fiscal policy. And on top of this, US growth has had a very strong boost from the AI boom over the last two years, which has not been mirrored in the UK (see Chart 8). This boom plausibly contributed about 1 percentage point to US growth in the first three quarters of 2025.
Source: OECD
Overall, David Smith’s recent article is yet another weakly argued effort that tries to pin the blame for recent sluggish UK growth on Brexit. There are far more compelling explanations for the UK’s growth performance since 2016, which are not connected to Brexit. In some cases these negative factors long precede the Brexit referendum, in others they are relatively recent policy own goals. The erroneous attempts to blame Brexit are doubly damaging in that they divert attention from the real constraints on growth and point policy makers in the wrong direction. It is important that this misdirection should stop and that the economics profession unites in focussing on the important real problems that are holding back our economy.
