Britain Undone: The Bruising Blows of Brexit

At the same time that Britain obsesses about the travails of the Royal Family, yet again; a speech given in Washington DC on Saturday, 18th October by Andrew Bailey, Governor of the Bank of England at the Group of Thirty’s 40th International Banking Seminar 2025, has largely passed the British public and media by. Long after Prince Andrew is forgotten, the grim issues discussed by Bailey will still have serious implications for the life and welfare of the British people.

The public may be minded to overlook the critical issues in Bailey’s speech, but they cannot avoid the consequences. Bailey’s remarks are an oblique confession, acknowledging (cagily), but at last the real economic condition of Britain and its problematic position in the world post-Brexit; but an oblique confession oddly chosen to be made 3,000 miles away from Britain, to an international bankers convention: where it is less likely to produce a major headline, or ‘front page’ story back in Britain.

At last Bailey ventured into Britain’s taboo subject that no politician may mention, and expect to survive (the British electorate, after all is on a dedicated economic suicide mission, led by their chosen Pied Piper, Nigel Farage). Bailey finally spoke in carefully modulated terms to acknowledge in broad terms what has been the abject failure of Brexit.

On Brexit, Bailey said this: “It’s my job as a public official to implement the decision taken by the people of the UK ….. But if you ask me what the impact is on economic growth, I do have to answer that question — and the answer is that, for the foreseeable future, it is negative.”

He emphasised the nature of the problem by adding that Brexit had reduced the ‘openness’ of the British economy, impacting on growth: “Make an economy less open and it will restrict growth”. Bailey’s search for a glimmer of light in the bleak economic landscape to which he referred, offered little upside: “Over the longer term,” he added, “there should be a positive, albeit partial, counterbalance as the economy adjusts” (quotations from ‘Business Matters’ Report of Andrew Bailey’s remarks, 19th October, 2025).

Bailey’s carefully selected weasel word is “partial”. Partial implies that recovery will never be full. Whatever Bailey says, he knows perfectly well that a “partial counterbalance” is not a complete solution, and that it implies settling for a grossly sub-optimal, thoroughly bad fix. The appeal to the long-term in economics is an appeal to a never-never land that exists only in fairy stories, softening the blow only for the gullible. It speaks to general, irresistible British economic decline; self-inflicted by Brexit, and irreversible. The taboo, of course, cannot be broken. A return to the EU, or even a Customs Union, are off the table, and beyond any possible horizon.

As John Maynard Keynes, in a sharp rebuttal of long-termism in economics, memorably said, “in the long term we are all dead”. The British people will nevertheless pay dearly for their stubborn intransigence on Brexit. And for those now living in Britain, that is our future; death, taxes, taxes, taxes, stagnation, with wholly destructive ‘fiscal rules’, and hapless bad Government – with relentlessly declining living standards, endless spending cuts, a perpetual declining economy, compared with Britain’s economic peers; indeed compared with the US, Europe, BRIC countries, and much of the developing world: all this is what the British people have chosen for all of us. Keynes knew that when bankers and economists appeal to the long-term, they have simply thrown in the towel.

From 2020, when the Brexit agreement between Britain and the EU finally applied, the consensus economic estimates suggest that Britain has since lost 4% of its GDP by leaving the EU. We lost our biggest open international market. This loss in a £3Trn economy may therefore be quantified. It is now a loss of around £ 150 billion of economic activity each year (see OBR analysis), and rising; indeed, NIESR suggests that this loss will grow to 5%-6% by 2035 (rather contradicting Bailey, unless Bailey views ten years out as ‘short-term’). That level of attrition would by then represent a loss of £225BN+ every single year. Over 5 years from 2020, the cumulative loss of GDP is probably now around £700Bn.

The UK can do as many trade deals with other countries (from weakness, because everyone we are dealing with can see how much we have lost, and why we are running around the world doing deals). Still, it will never be able to recoup the Brexit loss in any realistic timeframe. Britain can do as many desperate trade deals from a position of weakness with Australia, India, US, China (if you wish to understand the mess the Government is in over the China spy case collapse, start from here, the economics of Brexit – and not the inability of anyone now, it appears even to understand what the Official Secrets Act, 1989 and 1911 actually means or intends). All Britain’s current problems in economics or immigration stem, fundamentally from the nightmare Brexit has delivered, eight years after the vote. This is what the electorate voted for; whatever fairy story they chose to believe. The electors bought the snake oil from quite obviously advertised snake oil salesmen. In the end, electors cannot be saved from themselves.

For the avoidance of doubt, Brexit had a direct, catastrophic effect not just over economic activity under trade rules, but over immigration, because we also lost the Dublin III regulatory arrangements with the EU, with its provisions over immigration and returns policy. The explosive rise in immigration begins in 2020; again directly with Brexit. Read both UK Parliament, Dublin III and European Parliament, ‘The Brexit paradox: How leaving the EU led to more migration’: for the FACTS. Brexit had the opposite effect over immigration to that assumed by those who voted for it; because they didn’t understand the issue (including Dublin III), and the Brexiteers who led the public to the Brexit answer didn’t understand what they were doing.

In the economy, Rachel Reeves is going to break every pledge in the Labour Manifesto, and raise taxes even more in the Budget.

Why?

Fundamentally, the scale of the current Brexit shortfall of £150bn per year, means that from a government perspective, the cumulative losses in economic activity from Brexit, in one form or another will eventually end as discomfiting news in one place: the Budget deficit. Growth is a Reeves-Starmer illusion, because the scale of the Brexit losses are overwhelming. The only levers the Treasury can pull are the Fiscal Rules; levers that are not capable of managing the scale of such an endemic shortfall as Brexit presented. It will probably take decades to recover; even to where Britain began – pre-Brexit. And for Reeves, that means austerity now; for the foreseeable future, into all our horizons. There is no way out of this end game, given what Labour politicians and public believe, and the inadequate grasp they all have of the brutal economic facts. You cannot inject growth into an economy with austerity fiscal rules, and it is impossible for the Treasury to offset the scale of the loss of economic activity from Brexit. It cannot be done. Indeed, this will probably become far, far worse; and neither the Bank of England nor the political parties and our hapless politicians (Labour, Conservative or Reform) can fix it within a Brexit framework, in any foreseeable timeframe.