A decade after the Brexit referendum, the UK economy has significantly diverged from its pre-2016 path, with a new report showing that prolonged uncertainty and reduced business investment have left the country substantially weaker than comparable advanced nations.

The analysis, published by the Decision Maker Panel at King’s College London, estimates that by early 2025 the UK economy was about 8% smaller than it would have been had it remained in the EU, based on national macroeconomic data. Firm-level data suggests a slightly smaller but still substantial gap of around 6%.

Researchers say the drag did not come from a single shock but from years of hesitation across the business landscape. Political turbulence, shifting trade rules and repeated negotiations led companies to freeze or delay investment, hiring and expansion. Instead of concentrating on new products or growth strategies, managers redirected time and resources toward contingency planning and adjusting to evolving regulations.

“Investment is estimated to have been 12% to 18% lower, employment 3% to 4% lower, and productivity also 3% to 4% lower than it would have been if the UK had not voted to leave the EU,” the report states.

The effects have varied across sectors. Companies most deeply tied into European supply chains — many of them high-productivity exporters — absorbed the hardest impact. Researchers describe the Brexit shift as a rare example of a “reverse trade reform,” noting that barriers were raised rather than dismantled.

While trade volumes did not collapse immediately after the referendum, the study highlights that this was partly because existing EU rules remained in place for several years. The major break came when the Trade and Cooperation Agreement took effect, marking a clear divergence in the UK’s trading conditions.

As the 2010s gave way to the post-Brexit era, the UK’s economic position slipped against other advanced economies. The report estimates that UK GDP per capita has grown between 6% and 10% less than similar countries, placing the country around the 10th percentile among its international peers.

Researchers also concluded that many early forecasts, although directionally correct, underestimated how persistent uncertainty would be. What policymakers initially viewed as a temporary period of adjustment has become an extended structural shift affecting investment behaviour, productivity performance and confidence.

The findings outline a picture of a country reshaped not by a single political decision but by years of diverted business energy and weakened competitiveness. Almost ten years after the referendum, the report argues, the economic effects continue to ripple through the UK, with little indication that the long-term drag has yet begun to ease.

Catastrophe bonds, long associated with the US insurance market, are drawing rising interest worldwide as governments and financial institutions search for ways to manage the escalating costs of natural disasters. These high-yield securities, designed to transfer disaster-related risks from issuers to investors, are seeing renewed demand despite their complex structure and elevated risk profile.

The bonds, first developed in the 1990s, are typically issued by governments, insurers, or reinsurers. Investors earn attractive returns so long as no major disaster triggers a payout. If the event occurs, issuers retain the capital to cover damage costs, leaving investors with losses. For countries frequently hit by storms, wildfires, and floods, the products offer access to capital that can ease pressure on public budgets at a time when international aid flows are tightening.

“Cat bonds provide access to capital that is more flexible than on-balance sheet funding and can be directed toward specific risks,” said Brandan Holmes, senior credit officer at Moody’s Ratings. He said the instruments can also be less expensive than traditional reinsurance, offering governments and insurers another tool to manage climate-related losses.

Recent storms have highlighted the role these securities can play. Jamaica is set to receive a $150 million payout from a World Bank-backed program after Hurricane Melissa this year, a sharp contrast to last year’s Hurricane Beryl, when air pressure levels remained above the threshold required to trigger its bond’s protection.

Investors have also been drawn to the sector. Cat bonds offer yields that exceed those available on typical fixed-income assets, and they often move independently of broader financial markets, creating diversification benefits. The bonds also tend to have shorter maturities, which can give investors greater flexibility in shifting their portfolios. Data from Artemis shows the global market now totals roughly $58 billion (€50 billion), with the sector recording strong returns in 2023 and 2024.

However, analysts warn that the product’s intricate trigger conditions demand expertise. Losses can result from mid-sized disasters that fall short of headline-grabbing hurricanes. “You need a strong grasp of the risks being transferred,” said Maren Josefs, credit analyst at S&P Global, noting that tornadoes, wildfires, and floods have caught some investors off guard in recent years.

Cat bonds remain the domain of institutional investors, but access for individuals is slowly expanding. Earlier this year, the first exchange-traded fund focused on catastrophe bonds debuted on the New York Stock Exchange, allowing retail investors indirect exposure. In the EU, individuals can gain limited exposure through UCITS mutual funds, though the bonds themselves are restricted to qualified investors.

That access may tighten. The European Securities and Markets Authority advised the European Commission this year that UCITS funds should limit cat bond exposure to 10%, cautioning that higher levels could blur distinctions between traditional funds and alternative investment vehicles. The Commission will assess the issue in 2026 after further consultations.

While European demand remains modest, some analysts believe interest could rise if climate-driven disasters become more frequent in the region. For now, cat bonds remain a niche but growing tool for managing the financial fallout of an increasingly volatile climate.