How does BREXIT affect production patterns of multinational enterprises?

Kazuhiko Oyamada

No 690, IDE Discussion Papers from Institute of Developing Economies, Japan External Trade Organization(JETRO)

Abstract: This paper explores how the British exit (Brexit) from the European Union (EU) potentially affects the United Kingdom (UK) economy and the production patterns of multinational enterprises that choose the UK as either a destination market or a gateway to the EU market. Utilizing an extended version of the knowledge-capital model, simulation analysis reveals the following points: (1) Brexit will encourage firms in both the EU and the UK to change strategies to incorporate more horizontal-type affiliates so that Brexit will not reduce inward foreign direct investment (FDI) to the UK as long as the UK is attractive as a final market; and (2) In contrast, export-platforms serving the EU market owned by firms in non-EU countries will completely withdraw by the time Brexit is completed. To cover losses from the reduction in the number of export-platforms, efforts to enhance the attractiveness of the UK as a destination market would be a solution in the short-run, while seeking new economic partnership programs with both EU and non-EU countries will work in the long-run.

Keywords: Brexit; Foreign direct investment; Multinational enterprise; Export-platform; Knowledge-capital model; Great Britain; Europe; International business enterprises; Foreign investments (search for similar items in EconPapers)
JEL-codes: F11 F12 F15 F23 (search for similar items in EconPapers)
Date: 2018-02
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Published in IDE Discussion Paper = IDE Discussion Paper, No. 690. 2018-02

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https://ir.ide.go.jp/record/50172/files/IDP000690_001.pdf First version, 2018 (application/pdf)

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Journal Article: How does BREXIT affect production patterns of multinational enterprises? (2020)
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