Brexit and investment

Agnes Norris Keiller

LSE Research Online Documents on Economics from London School of Economics and Political Science, LSE Library

Abstract: In 2016, the UK voted to leave the European Union and growth in UK manufacturing investment ground to a halt. This paper uses administrative trade data to investigate the causal relationship between these events. We exploit firm-level customs data from 2005 on-wards to quantify firms' exposure to EU and non-EU trade in inputs and outputs. Focusing on investment as a forward-looking, dynamic outcome (since the UK did not leave the EU until 2021), we relate firms' investment to their pre-referendum EU exposure. This analysis shows firms' exposure to EU trade had a negative impact on investments post-referendum, especially in 2021. Estimated impacts are stronger for import exposure than for export exposure and there is some evidence of depressed investment from exposure to non-EU imports, likely due to the large depreciation in sterling that followed the vote. Had the UK voted to remain in the EU, these estimates imply manufacturing investment would have been over 7% higher, about £2.4 billion annually between 2016 and 2021.

Keywords: firm level; investment; international trade; European Union; manufacturing; Brexit (search for similar items in EconPapers)
JEL-codes: D20 F14 F50 L60 (search for similar items in EconPapers)
Pages: 17 pages
Date: 2024-08-05
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Persistent link: https://EconPapers.repec.org/RePEc:ehl:lserod:126796

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