Brexit, Revisited

On 31 January 2020, the UK officially withdrew from the European Union (EU). Five years later, how have the many forecasts—some optimistic, many pessimistic, according to our review of headlines and financial analysis—played out? Overall, we don’t think Brexit has been as disastrous or desirable as many forecasts estimated—an outcome with useful lessons for investors.

Our commentary focuses on politics’ economic and market fallout, but Brexit’s effects were extensive, with consequences for immigration, travel, law—even the fashion industry, as a lack of clarity over short-term work visas drove worries over possible disruptions.^[i] It was a major change requiring many, many adjustments.

And inspiring a litany of opinions and views—including economic projections. Our coverage of financial headlines found some veered toward optimism. Exiting allegedly meant getting out of the EU’s regulatory web, widely seen as stymieing growth. Leaving also opened the prospect of signing free trade deals—including with the world’s biggest economies (America and China).^[ii] But we also read many warnings about broad negatives, based on the presumption that trade between them would plummet—hurting the broader economy. A 2018 government analysis estimated that, even with a free-trade agreement replacing EU membership, British GDP would be around 5% - 7% smaller after 15 years outside the EU versus in it.^[iii] Besides trade, we saw other analyses arguing regulatory disparity meant companies would flee the UK, jeopardising London’s status as a global financial center.

So some expected for a Brexit boom, whilst others anticipated a Brexit bust. Five years later, neither looks correct, in our view, as reality appears somewhere in the middle and rather banal. On the trade front, not being tied to the EU has provided the UK with increased flexibility (e.g., tariff negotiations with the US). The UK also signed several free trade deals (with Australia and New Zealand) and economic agreements (with Japan).^[iv] Perhaps the UK’s biggest win was joining the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (yet somehow not winning a name change despite the UK’s, um, distance from the Pacific Ocean).^[v] But don’t overstate the benefits. As the UK government itself acknowledged, joining the pact potentially adds £2 billion a year in economic activity over the long run—less than 0.1% of UK GDP.^[vi]

On the flipside, exiting the EU’s single market hasn’t decimated UK commerce either, according to our research. The EU’s share of UK goods exports has trended downward more quickly than its share of imports after Brexit, but the change in the economic relationship doesn’t appear to have reversed longer-running trends. (Exhibit 1) Trade outside the EU became the UK’s major goods export and import growth engine well before the Brexit vote in mid-2016. And even this understates the full picture since it excludes services—the major driver of UK trade growth.^[vii]

Exhibit 1: EU’s Share of UK Goods Exports and Imports Over the Past Decade

Source: ONS, as of 5/2/2025. Real (inflation-adjusted) EU goods exports and imports as percentage of total UK exports and imports, quarterly, Q3 2014 – Q4 2023. Note, these measures don’t include services.

As for other worries, the UK’s mighty financial services sector hasn’t abandoned London according to our tracking of industry trends. Banks adapted by hiring more staff on the Continent, benefitting financial hubs like Paris and Frankfurt, whilst some EU firms added jobs in London to maintain a UK presence.^[viii] Now, it is true London has been losing listings—according to the London Stock Exchange, 88 companies delisted or transferred their primary listing from London last year through mid-December, with only 18 taking their place—the biggest net outflow since 2009.^[ix] Moreover, new listings were on course for their lowest since 2009.^[x] But in our view, this is less about London or the UK more broadly—and more about which equity sectors have led in recent years. The UK market slants toward value-heavy sectors.^[xi] But growth has led for most of the past 10 years whilst value has frequently languished, diminishing the appeal of listing anywhere value comprises the bulk of the market, since founders may think markets undervalue their companies.^[xii] Besides, it isn’t as though US or EU markets are seeing a huge flood of IPOs lately.^[xiii]

What of Brexit’s proclaimed benefits, like vast deregulation? That also hasn’t come to pass. Some of this hope was always overstated, in our opinion. Deregulation sounds great on the campaign trail, but altering well-entrenched rules requires more than waving a magic wand. It can require legislation, which can be cumbersome based on our research. For example, the UK aimed to remove all retained EU laws by the end of 2023—but pushed that back to at least 2026, as government didn’t have enough time to review all the legislation.^[xiv] Meanwhile, UK regulatory bodies have been adding headcount, not subtracting, according to a think tank’s recent study.^[xv]

Don’t get us wrong: Brexit has affected many parts of British society—and those changes aren’t all easily quantifiable. But all the analysis and long-term forecasting can overshadow businesses’, governments’, and individuals’ incentives and ability to adapt—a powerful force, in our view. Given Brexit’s long implementation period, we think companies had time to adjust to new political realities. From hiring staff in Europe to adjusting supply chains to appealing for extensions, businesses found innovative ways to carry on, based on our studies.

Note, too, the big news story of the day won’t always dominate, in our view. Over time, we find developments fade into the background. Yes, there was a time when we think Brexit stories dinged sentiment or stirred uncertainty—remember the soft vs. hard Brexit debate? The many aborted Brexit agreements? But our research shows markets are efficient discounters of widely known information. As the withdrawal process progressed and details firmed up, we think Brexit lost its surprise power as markets pre-priced in the probable outcomes—and moved on. As novel as Brexit may have been in 2016 and 2020, it eventually became background noise for stocks, in our view. These points, to us, are worth keeping in mind whenever headlines warn a big external factor will hurt economic growth or deliver massive benefits.