Forecasted effect of Brexit on real GDP in the United Kingdom (UK) 2018-2023

In the lead-up to the Brexit referendum of 2016 the central argument of those who wished to remain in the European Union was that leaving would have negative economic consequences. Prior to the referendum the OECD predicted that by 2020, that the British economy could be 3.3 percent smaller than it would have been without Brexit, and 2.5 percent smaller in 2023.

No Brexit, no problem?

The political deadlock surrounding the British establishment resulted in the UK government delaying Brexit, potentially until October 31, 2019. Despite the uncertainty the British economy has shown quite some positive signals, growing by 16.9 percent in the third quarter of 2020. However, the most recent employment data was not encouraging, with the unemployment rate rising to 4.8 percent in the third quarter of 2020.

Deal or no deal?

Until it is made clear what exact relationship Britain will have with the European Union, any forecasts made will be limited in their reliability. The current Brexit deal, which suggests Britain will leave both the single market and the customs union, has been rejected by the House of Commons three times. It could be the case that Britain still leaves with no deal, pivots toward a closer trading relationship, or doesn’t leave at all.