Ten years after the Brexit referendum, the UK economy carries a persistent and worsening drag estimated by Bloomberg Economics at between £100 billion and £200 billion annually, with Brexit having reduced UK GDP by 6% to 8% by 2025, roughly double the initial official estimate, as incoming Prime Minister Andy Burnham prepares to inherit a structurally constrained economy.
The Institute for Fiscal Studies forecasts UK GDP growth averaging 1.4% from 2026 onward, below the Office for Budget Responsibility’s 1.8% projection, with unemployment expected to peak at 5.1% this year before gradually declining. Public debt is approaching 100% of GDP, leaving virtually no fiscal headroom for additional spending. Bank Rate is forecast to fall to 3.25% by year end as the Bank of England continues easing, though CPI inflation is expected to average 2.3% in 2026, driven by energy and food price pressures linked to the Iran war.
The EU faces its own internal pressures. Member states are locked in standoffs over defence spending burden-sharing, migration reform and China trade policy, with the European Commission pushing new trade defence tools while France, Italy and Spain resist Chinese retaliation risks on their agricultural exports.
The UK-EU summit, originally planned for July 22, has been postponed pending Britain’s leadership transition.
