Entry 08: Brexit’s Economic Reckoning: The Illusion of Sovereignty and the Cost of Isolation
As the European Union and the United Kingdom revisit fishing rights under the post-Brexit trade framework, a familiar chorus has returned.
Pro-Brexit commentators—many of whom were instrumental in shaping the 2016 referendum narrative—have seized on the latest developments to reassert claims of regained sovereignty and national renewal. Yet beneath the surface of the current maritime negotiations lies a broader and more sobering economic reality—one that continues to elude meaningful political reckoning.
The False Cry for Liberation
In 2016, the then Justice Secretary, declared that EU membership prevented the UK from choosing “who makes critical decisions which affect all our lives.” It was a claim that resonated with voters but was, in substance, deeply misleading. As an EU member, the UK retained significant influence over European legislation, including veto powers and opt-outs. The failure to challenge such assertions has allowed a narrative of victimhood and liberation to persist—even as the economic consequences of Brexit become increasingly apparent.
Thatcher the European
Margaret Thatcher—ironically a Brexiteer icon—understood this point of political power and the strategic value of EU membership. Her 1984 rebate negotiations and role in shaping the Single European Act of 1986 were aimed at securing British interests within a framework of shared prosperity. She preserved monetary sovereignty while ensuring access to the single market—a balance today’s leaders have failed to replicate and cannot expect either inside or outside the EU.
Thatcher positioned the UK at the top table of the EU
The Economic Cost of Disconnection
The Office for Budget Responsibility (OBR) estimates that Brexit has led to a 15% decline in trade intensity, equating to an annual loss of approximately £150 billion. National income is estimated to be 4% lower than it would have been under continued EU membership—roughly £106 billion annually, based on 2023 GDP figures. These are not abstract numbers; they represent foregone investment in public services, infrastructure, and social care—areas that disproportionately affect SMEs, middle-income households, and lower earners.
Investors Aversion to Risk
Business investment has also suffered. The National Institute of Economic and Social Research (NIESR) estimates that investment in 2023 was 13% lower than it would have been in a “Remain” scenario. As the US administration has learnt to the cost of the US economy and citizens political instability, regulatory uncertainty, and risks might sound macho but come with long-term costs. In exactly the same way Brexit has diminished access to the EU single market and contributed to a climate of caution among investors. This is reflected in the low levels of IPOs on the LSE and failure of the government to attract any significant new investment to the economy.
Populism’s Assault on the Rule of Law
The political fallout from Brexit has not been confined to economics. In the first instance and prior to the vote there was the political assasination of the MP Jo Cox on the 16th of June 2016. Political assasinations are rare and are a warning sign of broader political tensions and a toxic, polarised and dangerous forces sweeping through society. This event alone should have been a warning for all politicians as to the seriouness of extremes of which they were collectively unleashing. The 2019 prorogation of Parliament—later ruled unlawful by the Supreme Court—marked a low point in the UK’s constitutional history. The subsequent vilification of senior judges as “enemies of the people” signalled a troubling shift in political discourse, one that continues to erode public trust in institutions and the rule of law all if which are critical for economic growth and stability.
Trade Barriers and the Myth of Global Britain
Brexit has erected new barriers to trade, particularly in goods. Exports remain 18% below their 2019 levels. While services—especially finance and professional sectors—have fared better, this has done little to offset the decline in manufacturing and industrial exports, particularly in the low income regions that were pivotal to the Brexit vote. In 2025 some of these areas, are still being fed the same lie of Brexit, they remain in support of isolationism, which all comes as a cost to the next generation. The UK finds itself in the unique position whereby a large percentage of the elderly population committed to a myth based in the myopia of nationalism expect the young in school or university trying to start out on their lives to economically suffer. What is even more extraordinary is that those in the most economic deprived areas, who have suffered the most from Brexit are now lining up to vote for more of the same. In over a decade not one political party or individual has effectively laid down the basic facts of brexits economic decline and case for rejoining the EU.
Successive Government Failures
Successive UK governments—under Johnson, Truss, Sunak, and now Starmer—have pursued bilateral trade deals with limited returns. Agreements with the US and India, often touted as Brexit dividends, have produced modest gains at best—and ignominy at worst. In 2024, UK trade with the EU stood at £615 billion, nearly double the £314.6 billion in trade with the US. The notion that global trade could substitute for the EU’s single market has proven to be a costly miscalculation.
Blame-Shifting and the Idleness Narrative
Since Brexit, populist narratives on both the left and right have sought scapegoats for the UK’s economic malaise: the civil service, “big government,” neoliberalism, immigrants, regulation (too much or too little), and the so-called “woke agenda.” On the left, Jacobin magazine framed its pro-Brexit stance as a crusade against neoliberalism, claiming that “Brexit offers a once-in-a-lifetime opportunity to show that a radical break with neoliberalism is possible.” Meanwhile, hard-right populists who once championed a “no-deal” Brexit—despite its catastrophic economic impact—eventually turned on the British people themselves. They argued that the problem, including among Brexit voters, was a culture of laziness: “the worst idlers in the world.” If only the public would work harder and tighten their belts, they claimed, Britain’s greatness would be restored.
The Nostalgia Trap
Brexit was, in part, a vote fuelled by nostalgia—a yearning for a past that never truly existed. Since 1962 and the end of empire Britain had lost its identity on the global stage. Left without meaning it was content to construct the “special relationship” with the United States to position itself in some sort of reflective glory and often invoked as a counterweight to Europe. The myth then and now has no substances and delivered little economically. The fact is the UK’s most consistent and valuable trading partner for over six decades has been the European Union. If the UK wants a strengthened sense of sovereignty, then the political class must recognise that this only comes from economic power. Trade is the factor which creates the leverage for political power, strengthening of sovereignty and a national identity of which citizens can be proud.
Public Sentiment and Political Futures
Any political move toward strengthening ties with the EU—though economically beneficial for most citizens and businesses—also risks reigniting the outrage industry. Original pro-Brexit cheerleaders may reemerge, eager to monetize their manufactured indignation, economic illiteracy, and politics of division. One hopes they are ignored as the liars they have proven to be.
Public opinion has shifted. Only 30% of Britons now believe Brexit was the right decision which mirrors the support for pro-Brexit parties such as UKIP-Reform UK remains strong, polling at around 30%. The Conservative Party, struggling to define its post-Brexit identity, and a Labour Party that often alienates its own base, are being outflanked by populist insurgents on both the right and the left.
Reckoning or Repetition?
The last 24 hours has seen a significant shift as to the direction of travel the UK will take in terms of its relationship with the EU. One thing the current government has done right is to start opening negotiations with the UKS largest trading partner on a number of key issues. The question now is whether the electorate will fall for the same promises a second time. The economic data is clear. The political consequences of isolationism or hitching one’s future to a volatile US administration are clear. What remains uncertain is whether the UK’s political class is prepared to confront the realities of Brexit—or whether it will continue to trade in illusions.
We’ll get there in the end
JM
