The United Kingdom finds itself at a critical juncture at the moment – 2026 marks the 10th year since the nation voted to leave the EU and is set to make way for the 7th Prime Minister since then, all while dealing with the consequences of the Middle East war and a shaky domestic economic landscape with rising costs and falling confidence levels. Despite the promise of a better Britain along with the move, 10 years later, most analyses are painting a dim picture about its current state. While Brexit alone may not be the sole reason for any change in shape of the economy, given how uncertain and volatile the global economy has been over the past decade, the move-away has certainly made a considerable impact and now has enough data to look back and evaluate.
What prompted Brexit in the first place?
The UK’s relationship with the EU has been anything but a smooth ride. Ever since joining the European Economic Community (ECC - a six-member trading bloc back then) in 1973 as result of slow economic progress, there have been multiple efforts by many parties to reverse course and take the solo path. Heavy scepticism towards deep integration with the EU was the main driver here. Given the scale of the UK economy back then compared to the rest, much of the bloc’s growth was mainly driven by the UK and this had mixed sentiments with some advocating for, while many claiming that this undermined the countries’ potential for growth. For instance, data from the Centre for Economic Policy Research (CEPR), indicated that Britain’s GDP per capita was almost 30 percent higher than that of the EEC nations in 1950, yet by 1973 it was roughly 10 percent lower.
Constant pressures by multiple parties including MPs within his own Conservative Party prompted Prime Minister David Cameron to take a gamble and re-visit the UK’s involvement with the EU by calling the referendum on EU membership in February 2016. The results turned out and the electorate had voted to leave the bloc by 52% to 48%.
The promises of the campaign were simple - “take back control” of immigration, restore the country’s sovereignty, free up more money for the country’s health service, and forge trade deals with the rest of the world with the hopes of boosting economic prosperity.
How is it looking now?
Ten years later, as the data suggests, the economy has shaped to be quite different as a result of the move AND the rapidly changing global landscape on top of multiple shocks including the Covid-19 outbreak, the energy shock as a result of the Russia-Ukraine war in 2022, Trump tariffs and a bigger global energy shock as a result of the US-Iran war that are all outside of UK’s control.
However as far as Brexit alone is concerned, the results have not been very euphoric as promised. In terms of growth, the country hasn’t really picked up dramatically. Growth has been fairly contained and remained at levels similar to other EU countries such as Germany and France. Investments have not done dramatically well either, due to years of political or regulatory uncertainty. Employment and Productivity have also seemed to take a hit due to a combination of elevated uncertainty, reduced demand, diverted management time, and increased misallocation of resources from a protracted Brexit process.
Despite the promise to “take back control” of immigration, The UK now has net emigration with EU countries, but migration from non-EU states with work supply shortages, increase in international students, and emergency visa schemes extended to countries such as Ukraine. Similarly, studies show how the Sterling Pound, trade, inflation and equity markets have also indicated a downturn due to Brexit and a combination of other shocks that has changed how the economy has fared over the past decade.
Despite all of this, the UK continues to play a major role in the global economic landscape while maintaining its place among the top five economies and contributing to much of the world’s consumption and overall demand. The country has persistently made efforts to revive trade, attract investments, resolve social barriers and establish stability. In its latest sign towards change, the country is set to appoint Andy Burnham as the next Prime Minister who vowed on Monday to deliver radical change to the nation’s politics, pledging to give away a chunk of his power by handing greater autonomy to local leaders in a “circuit-breaker” for the sclerotic British state.
What could this mean for Sri Lanka?
As one of Sri Lanka’s largest trading partners, the UK plays a critical role in Sri Lanka’s foreign exchange earnings both in terms merchandise trade as well as service exports, Tourism in particular. As Sri Lanka re-builds and continues to gather momentum in terms of economic stability, strong demand conditions from its trading partners remains key to amplify exports and attract investments. Outside the traditionally known areas such as exports and tourism, the UK over the years, has evolved to become a key destination for Sri Lankan migrant workers as well. By end 2025, the UK stands as the third largest country in terms of remittances inflows to the country. It has, and still is contributing massively to sustain the performance of worker remittances despite the war in the Middle East.
Therefore, any demand slowdown that could possibly take place - outside of the effects of the Iran war - due to higher inflation, lower productivity or any other factor could affect Sri Lanka as well. In that sense, keeping an eye out for any domestic policy changes subsequent to these political and economic reforms taking place is advisable particularly for those operating in international markets.