The decision to leave the European Union made by the UK population in a referendum in 2016—Brexit—has likely had a large and negative impact on the UK economy. Indeed, much research carried out in the build-up to the referendum and its aftermath suggested that Brexit would lead to a reduction in trade between the United Kingdom and the European Union that, in turn, would lead to a fall in UK productivity and GDP growth. In addition, the ending of free movement of labour, which resulted from Brexit, was also predicted to have a major impact on the UK labour market in general and certain sectors, where firms were reliant on migrant labour from the European Union, in particular. Worse still, the uncertainty created by Brexit around exactly what the future trading arrangements with the European Union would look like would lead to a stalling of business investment and a further slowing of UK GDP growth.

Now that Brexit has happened, it would seem an opportune moment to revisit this research and assess the extent to which the negative effects it predicted have come to pass. Of course, at the same time as the United Kingdom officially left the European Union, the UK economy was hit by the COVID-19 pandemic shock, and this was followed soon after by the Russian invasion of Ukraine. Both these shocks would be expected to have large negative effects on the UK economy and disentangling the effects of Brexit from those associated with these other shocks is not straightforward. Despite this, the contributions contained within this Special Issue all aim to do just that. They all seek to evaluate the impact of leaving the European Union on the UK economy, given that the Trade and Cooperation Agreement is now in place. And they also examine the ongoing impact of Brexit on different areas of the economy.

In his contribution to this Special Issue, Bernard Casey (Social Economic Research) concentrates on the impact of Brexit on the UK labour market. In particular, he examined the evidence behind the claim that Brexit led to the outward shift of the Beveridge curve seen since the COVID-19 pandemic as the ending of free movement implied an increased mismatch between the available workers and the available jobs. Using a difference-in-difference approach, he found that the ratio of vacancies to unemployed was over a quarter higher than it might have been had the United Kingdom not left the European Union. Although this suggests that Brexit might have led to an increase in mismatch in the labour market, the author suggests that it is also possible that, with unemployment at such a low level, any increase in demand just led to a rise in vacancies with no impact on unemployment. That is, the Beveridge curve is vertical at this rate of unemployment. Further data are needed before we can fully distinguish between these two hypotheses.

In their contribution to this Special Issue, Richard Davies (Chicago and London School of Economics) and Josh Hellings (London School of Economics) ask the question to what extent Brexit contributed to the large, 30%, rise in UK food prices since early 2021. In answering this question, they put together a framework which enables them to identify the contribution of trade frictions to inflation in ‘close to real time’. They collected the daily prices of over 100,000 supermarket items, covering 80% of the UK grocery market, and were able to identify the country of origin of over 67,000 products. This enabled them to link UK food price changes to individual EU economies. They found that, since August 2023, the prices of food products coming from the European Union have increased by more than half as much again as the prices of domestically sourced products. This suggests a clear Brexit impact, which could rise again given the introduction in 2024 of further non-tariff barriers applying at the border between Britain and the European Union.

In their contribution to this Special Issue, Ahmet Kaya, Iana Liadze, Hailey Low, Stephen Millard and Patricia Sanchez Juanino (National Institute of Economic and Social Research) use the National Institute’s Global Econometric Model, NiGEM, to assess the impact of Brexit on UK business investment and, hence, productivity. The United Kingdom leaving the European Union is modelled as an exogenous decline in UK trade with the European Union and associated reduction in the terms of trade, an exogenous fall in productivity and a permanent increase in uncertainty. The authors found that these shocks led to an approximately 12% decline in UK business investment in 2023, which corresponds to a real GDP loss of 2–3%. Additionally, they found that Brexit has reduced labour productivity by around 2–2.5% as of 2023.

In their contribution to this Special Issue, Stephen Millard (National Institute of Economic and Social Research), Anamaria Nicolae (Durham) and Michael Nower (Durham) went further by allowing the fall in productivity to result endogenously from the reduction in trade resulting from the increased trading costs associated with the Trade and Cooperation Agreement relative to the pre-Brexit position. They used a three-country macroeconomic model of trade, with labour market frictions and heterogeneous firms, to analyse the effects of Brexit on UK productivity. Their model suggested that Brexit would lead to a near immediate fall in UK GDP of around 7.5%. GDP would then be expected to recover, rising back to a long-run level around 4% below its pre-Brexit trend. Increases in the costs of trading between the United Kingdom and the European Union lead to a reduction in the degree of competition provided by EU firms in the UK domestic market. This allows more ‘low productivity’ UK firms to remain in the market and this means lower aggregate productivity in the United Kingdom through a ‘batting average’ effect. In addition, increased costs of trading will also lead to fewer UK firms exporting; as these will tend to be high productivity firms, this will again lead to a fall in aggregate UK productivity.

Finally, in his contribution to this Special Issue, Jonathan Portes (King’s College, London) discusses the evidence to date for the effects of Brexit on migration into the UK economy. One implication of Brexit has been the end of free movement between the United Kingdom and the European Union and the introduction of a new migration system to replace this. This new system has resulted in large changes in total immigration, both for work and study. It has also resulted in large changes in the composition of migrants in terms of both their country of origin and sectoral make up. There has also been a significant political backlash, which resulted in the significant further changes to the system announced in December 2023.