On June 23, 2016, the United Kingdom voted 52-48% to leave the European Union, triggering one of the most consequential political and economic shifts in European history. The immediate fallout was dramatic: the pound plunged, the FTSE 100 fell sharply, and prime minister David Cameron resigned after leading the unsuccessful campaign to remain in the EU.

After years of political deadlock, including Theresa May's failed attempts to secure parliamentary approval for a withdrawal agreement, Brexit was formally completed under Prime Minister Boris Johnson in 2020, according to CNBC. 

Against this backdrop, below we highlight how Brexit impacted the UK economy, stocks and related ETFs.

Inside the UK Economic Growth

The anticipated post-Brexit economic boost has largely failed to materialize.

Although the U.K. economy was also hit by the COVID-19 pandemic and Russia's invasion of Ukraine, Stanford University professor Nicholas Bloom estimates that Brexit reduced U.K. GDP by 6-8% by 2025, as quoted on CNBC. He attributes the drag to prolonged uncertainty, weaker demand, and inefficient allocation of resources during the lengthy Brexit process.

However, the momentum of the economic reform is probably shifting slowly toward the right direction. The U.K. economy expanded by 0.6% in Q1 2026, matching market expectations and marking the strongest growth since Q1 2025, per tradingeconomics. This follows an upwardly revised 0.2% increase in the previous quarter.

EU Remains Britain's Largest Trading Partner

Despite Brexit, the European Union continues to be the U.K.'s biggest trading partner.

In 2025, the EU accounted for 41% of U.K. exports and 50% of imports. A trade agreement that came into effect on Jan. 1, 2021, preserved tariff-free and quota-free trade between the two sides, helping maintain strong commercial ties, per the same CNBC article.

Sterling Remains Weaker

According to Convera, sterling has traded roughly 10% below its pre-Brexit level against both the euro and the U.S. dollar. Since the referendum, GBP/EUR has averaged €1.16 versus €1.27 during the previous decade, with the currency spending nearly all of its trading time below €1.20, as mentioned in the same CNBC article.

Invesco CurrencyShares British Pound Sterling Trust (FXB Quick QuoteFXB - Free Report) has offered only 0.7% annualized return over the past five years and 3.7% annualized gains over the past three years. The weaker currency has made imported goods, energy and raw materials more expensive.

However, despite the currency weakness doing the rounds, the annual inflation rate in the UK stood at 2.8% in May 2026, unchanged from the previous month and below market expectations of 3.0%. The reading remained at its lowest level since March last year.

UK as a Financial Services Center: Still a Bright Spot

Britain always acts as a financial powerhouse in Europe, and the UK remains Europe’s top destination for foreign direct investment into financial services. Between 2015 and 2025, the UK attracted 949 FDI projects, more than France and Germany combined, according to EY, a professional services firm, as quoted on CNN.

Performance of U.K. & Euro Zone ETFs

The internationally focused FTSE 100 has significantly outperformed the more domestically oriented FTSE 250, benefiting from overseas revenues and a weaker pound, per CNBC.

iShares MSCI United Kingdom ETF (EWU Quick QuoteEWU - Free Report) has offered an annualized return of 10.95% for the past five years, topping 9.76% return provided by iShares MSCI Eurozone ETF (EZU Quick QuoteEZU - Free Report) . However, over the past three years, EWU offered an annualized return of 15.69% versus 18% gains in EZU. It shows that the returns of both territories are almost in line over the past five years.

However, over the past 10 years, EWU has offered an annualized gain of 7.57% (per Guru Focus) and EZU returned 10.33% gains. FXB has lost 0.25% over the past decade, while FXE is up 0.06% over the past decade on an annualized basis.