Global Trade

United Kingdom: an economy damaged but not sunk by Brexit

April 11 2025

SPECIAL FEATURE 1/5 – The second largest European power in terms of GDP and population, the United Kingdom chose to leave the European Union. Five years after Brexit, its economy has not collapsed but trade in goods has suffered, and the logic of blocks that is strengthening on a global scale increases its vulnerabilities.

Brexit or not, the British economy remains firmly anchored in second place in the European rankings. With a gross domestic product of $3,381 billion in 2023, according to World Bank data, the UK is behind Germany and ahead of France, Italy and Spain. Globally, the country ranks 6th in the GDP ranking, behind the US, China, Germany, Japan and India. It is therefore a major producer of wealth.

The population of the United Kingdom was estimated at 68.35 million inhabitants in 2023 (+1% compared to 2022). In this the country also ranks second in Europe, behind Germany (83.3 million) and just ahead of France (68.29 million). It is therefore also an important consumer market.

A Brexit that is not at the root of all evils

The UK officially left the European Union on 31 January 2020, while remaining in the single market and in the customs union during a transition period of eleven months. While some observers predicted an economic catastrophe, this did not occur. Certainly, in 2020, the UK experienced a 10.4% contraction in GDP, stronger than Germany or France, but it would be quite inaccurate to blame it solely on the effects of Brexit. That year, the dominant factor for change was undoubtedly the Covid-19 pandemic. The dynamic rebound of 2021 and 2022 also demonstrates this.

  • A development in GDP and inflation in line with EU trends

Like most major European economies, The UK then experienced a slowdown in activity in 2023 and even two quarters of recession. But here too it would be a little too easy to blame Brexit. Germany also experienced a recession in 2023, which even extended into 2024, which was not the case in the UK, where the GDP grew by 1.1% last year. A figure both higher than the forecast (0.9%) and that of the previous year (+0.4%). 

In short, during the post-Brexit and post-pandemic period, the United Kingdom, still intimately connected to the European Union, experienced quite similar developments in its economy. However, Brexit may have had an aggravating effect on certain parameters. This is the case, for example, in terms of inflation. All European countries have been hit hard, but in the UK, labour shortages have been made worse by Brexit, which has “slightly exacerbated inflationary pressures,” the economist Stephen Hunsaker[1] said. This phenomenon was particularly felt in the road freight transport sector. Overall, the UK is showing quite weak growth and is suffering from a weak increase in productivity. These difficulties date back to the global financial crisis of 2008. So Brexit did not create this situation, but it did not help it either.

  • A weakening in foreign trade

Brexit has, however, weighed on the development of foreign trade, to which will be devoted the second dossier of our series. “Overall, the UK’s ‘trade openness’ (trade as a proportion of GDP) has fallen significantly, and considerably more than in other advanced economies,” pointed out Stephen Hunsaker.

Paradoxically, since Brexit, the UK’s share of trade with the EU has increased, despite slow but steady erosion in the two decades that preceded it. However, this rebound has hardly benefited the trade in goods, which is more or less stagnant, whereas service exports, another major trend in the past 20 years, are growing. The reintroduction of customs and regulatory barriers has weighed on trade in goods, especially for small businesses, increasing costs and lengthening delivery times.

The United Kingdom relied on its new-found freedom to establish trade agreements outside of the European Union. But this policy called “Global Britain” failed. Brexit has not turned Britain into a global trading superpower. The much hoped-for deal with the US, the UK’s second biggest trade partner after the EU, has failed to materialise. Negotiations with India are ongoing, but any agreement that does emerge will be limited in scope and bring only minor changes. New deals have been struck with Australia and New Zealand, and the UK has joined the CPTPP – a free trade agreement between 11 Pacific Rim countries. But these economies are too small and too far-away to matter much for UK trade. Even the government’s own analysis suggests that the economic benefits of these deals will be minor, with each agreement expected to increase UK GDP by less than one-tenth of 1%,” said the analyst Thomas Sampson.[2]

After these disappointments, and in an even more tense global context since Donald Trump’s arrival as president of the United States, the United Kingdom seems to be moving towards a more pragmatic approach of tightening ties with its European Union neighbours.

  • From Brexit to Reset

Brexit did not lead to collapse, but it weakened foreign trade and did not solve the structural problems of the British economy. Since 2020, public opinion in Britain has evolved, and current tensions with the United States could make a further case for appeasement. The Labour Prime Minister, Keir Starmer, who has held the post since July 2024, said he was favourable to a “reset” of relations with the European Union. This initiative has been welcomed by the British Chambers of Commerce which has published a manifesto containing 26 recommendations to accompany this move. 

A market leader in services

The British economy is traditionally characterised by the domination of its services sector. According to data from the UK's Office for National Statistics (ONS), this sector, which includes retail, hospitality and finance, as well as public services such as health and education, accounted for 80% of the UK's total gross value added[3] (GVA) in 2023, up from 70% in 1990. 

uk_economic_output_per_industry

Non-service sectors, including manufacturing, construction, agriculture, and utilities, account for around a fifth of the UK's total economic output. As in most major Western economies, the share of manufacturing industry, in particular, has fallen sharply, from 17% in 1990 to 9% in 2023, according to the ONS.

  • The principal manufacturing sectors

Total manufacturing output in the UK rose by 3.9% in 2023 to reach £456.1 billion (around €540 bn). Food manufacturing, which grew by 5.3%, remained the largest sector, accounting for 20.8% of total sales by manufacturers of finished products in 2023. In second place, we find the automobile sector, which posted a very clear rebound of 22% in 2023.

  • The Invest 2035 plan

The UK is in the process of elaborating its new industrial strategy within the framework of a plan which it has named "Invest 2035". Presented in October 2024, the plan sets out the UK's roadmap for the next ten years, with the aim of "transforming its industrial landscape, stimulating innovation and strengthening its global economic position, while moving towards a sustainable and environmentally friendly economy".

Eight sectors have been identified as being growth-driving.

  • Advanced manufacturing
  • Clean energy industries
  • Creative industries
  • Defence
  • Digital and technologies
  • Financial services
  • Life sciences
  • Professional and business services

Summary

Five years after Brexit the UK has started to take stock of its effects. Leaving the EU has not prevented the country from maintaining its place among the world's leading economies. Nevertheless, foreign trade has weakened and the new-found freedom has failed to remedy the structural problems. The negotiations concerning Brexit were extremely difficult. Today, tensions are easing on both sides, and a fresh look at relations between the United Kingdom and the European Union is on the agenda. The trade and geopolitical tensions initiated by the new Trump administration could provide a further boost to this move towards reconciliation. “A return to ‘the single market, the customs union, or freedom of movement’ is ruled out. Within the confines of these red lines Labour wants to ‘tear down unnecessary barriers to trade’", explains the analyst Jannike Wachowiak[4]. Transport operators and logisticians can only be delighted if the two parties manage to reach an agreement on the development of trade and greater fluidity, given that the economies are so deeply intertwined. But the road is still long as the rupture has left scars.


[1] Stephen Hunsaker, “The UK economy since the global financial crisis,” The State of the UK Economy 2024, UK in a Changing Europe, 31 January 2024.

[2] Thomas Sampson, “The UK economy since the global financial crisis”, in THe State of the UK Economy 2024, UK in a Changing Europe, 31 January 2024.

[3] The gross value added (GVA) is a measure of the economic output which could be considered as being similar to the Gross Domestic Product (GDP) The GVA measures the value of the output of goods and services minus production costs, excluding labour costs.

[4] The Brexit Files: from referendum to reset

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Graduated from the Superior School of Journalism in Lille, Anne spent most of her career in the international trade and logistics press, before joining Upply.
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