New Studies Reveal Brexit’s Economic Impact, Defense Talks Collapse

Recent analyses indicate that Brexit has inflicted greater damage on the U.K. economy than previously acknowledged. This revelation comes alongside the collapse of defense talks between the U.K. and the European Union regarding the SAFE rearmament program, raising questions about future cooperation.

Brexit’s Economic Toll Exposed

A major study conducted by the National Bureau of Economic Research (NBER) highlights that the effects of Brexit on the British economy are more severe than earlier estimates suggested. The report, published in November, claims that by 2025, Brexit could reduce U.K. GDP by between 6 percent and 8 percent. Additionally, it estimates a decline in investment by 12 percent to 18 percent and employment reductions of up to 4 percent.

These findings were brought to the forefront during the recent budget discussions, where Keir Starmer, leader of the Labour Party, emphasized that Brexit has “significantly hurt our economy.” He urged for a reduction of “frictions” with the EU to enable “economic renewal” in the U.K. This follows a budget delivered by U.K. finance chief Rachel Reeves, which faced criticism amid concerns about the country’s economic trajectory.

The NBER study stands out by utilizing company-level data from approximately 7,000 firms, representing about 10 percent of the U.K.’s private sector employment. The authors concluded that the prolonged uncertainty stemming from the Brexit process has adversely affected investment and productivity. They noted that the broader implications of Brexit have included “elevated uncertainty, reduced demand, diverted management time, and increased misallocation of resources.”

Economists from prestigious institutions such as Stanford University, the Bank of England, and the University of Nottingham contributed to the research, emphasizing the persistent challenges facing the U.K. economy post-Brexit.

Defense Talks Fail to Materialize

In another setback for U.K.-EU relations, talks regarding the U.K.’s participation in the EU’s €150 billion SAFE rearmament program have collapsed. Nick Thomas-Symonds, the U.K.’s Brexit minister, described the outcome as “disappointing” but asserted that negotiations were conducted in good faith. He emphasized that any agreements must align with national interests and demonstrate value for money.

The negotiations faltered primarily over financial expectations. The EU initially sought a U.K. contribution of up to €6.5 billion, which was later scaled back to around €2 billion. The U.K. anticipated a significantly lower figure, creating a substantial gap that ultimately led to the breakdown of discussions.

Despite the setback, Thomas-Symonds hinted at the possibility of the U.K. rejoining the SAFE program in future phases, although there are no current indications that discussions will resume soon. The collapse of these talks follows a period where both sides had expressed optimism about reaching an agreement.

Kevin Craven, CEO of ADS, the U.K. trade association for the aerospace, defense, and security sectors, expressed disappointment, stating that the failure represents a significant lost opportunity for the U.K. defense sector. He noted that while the U.K. may still participate in some projects under third-country terms, this arrangement would not match the potential benefits of full participation in SAFE.

Concerns over Animal Welfare Standards

In addition to economic and defense issues, there are growing concerns regarding the U.K.’s ability to uphold its animal welfare standards in light of a planned agri-food deal with the EU. Campaigners warn that without a specific carve-out, the U.K. may be unable to block imports of food produced under methods disallowed domestically, such as sow stalls and battery cages.

The EU is set to ratify a trade deal with the Mercosur countries—Brazil, Argentina, Uruguay, and Paraguay—where such practices are prevalent. The projected increase in imports from these nations could lead to a significant rise in the availability of products that do not meet U.K. welfare standards, raising ethical concerns among consumers and advocacy groups.

Organizations like Animal Policy International are urging the U.K. government to negotiate for a carve-out similar to the one granted to Switzerland, which allows for higher welfare standards in trade agreements. The government has indicated that animal welfare remains a priority in negotiations, but has not confirmed any specific demands regarding such provisions.

As discussions continue on multiple fronts, the implications of these developments are likely to resonate beyond immediate economic figures, affecting both the U.K. public’s perception of Brexit and its broader relationship with the EU.