Globalization Shocks: The United Kingdom After Brexit


23 June 2026 Britain Is Still Deep in the Shadow of Brexit: Ten years after a slim majority voted to leave the European Union, the economic and political effects of that decision continue to disrupt the United Kingdom.



Part of the rationale for Brexit was essentially the Shock Doctrine: shock the economic system out of it's "socialized stupor" and assume that the new freedom will unleash unlimited exponential growth. Ten Years after Brexit, the verdict hasn't been positive (except for Nigel Paul Farage, a British politician who has been Leader of Reform UK since 2024).

One of the original arguments seemed to be that , without the "heavy-handed regulation" of the European Union (EU), the UK could be benefiting more from Globalization. In this post, I will use the UKL20 Model with input from the KOF Index of Globalization to see how much a positive "globalization shock" would have benefited UK growth.

In the UKL20 KOF Input Model (see below), Globalization has very small effects on the UK Economy. The same conclusion can be drawn from the Impulse Response Diagram at the beginning of this post.

For more of my posts about the United Kingdom see Blog Roll: UK. Britain is struggling. The future is quite unclear as would be expected from a Random Walk (see below).

You can run the UKL20 BAU Model on my Google site (here). For more of my posts on the UK see my Blog Roll: United Kingdom.


Notes

Wikipedia

Neoclassical Growth Theory



The causal structure for the  Solow-Swan or Cobb-Douglas production functions take population growth (N) and Technology (TECH) as exogenous to the employment (L), production (Q) and Capital formation (K) processes. The causal model predicts that if either Population Growth or Technology change reach an equilibrium that the system will reach a steady state. The assumption is that Technological change will never cease.

In the causal diagram above, I have added shocks (E) to the model. Tech Shocks (E2) might involve Artificial Intelligence (AI)--it is not clear at this point whether the shocks will be positive or negative. Population Shocks (E1) might include preventing immigration. Output Shocks (E3) might include Recessions and Depressions.


AIC Statistics



The best short-term model for the UK is the Random Walk (muddling through). The BAU and other models have overlapping 98% confidence intervals for the AIC Statistics.

UKL20 Measurement Model

Three component state variables for the UKL20 model explain 96.5% of the variation in the indicators. UK1 = Growth-EMissions-Unemployment Controller. UK2 = Energy-Emissions-Employment controller. UK3 = Unemployment-Energy-Population controller.


UKL20 KOF Input



The KOF Globalization Input model is unstable with small coefficient effects on UK State Variables.

















 

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