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Voting with their money: Brexit and outward investment by UK firms

Breinlich, Holger, Leromain, Elsa, Novy, Dennis and Sampson, Thomas (2020) Voting with their money: Brexit and outward investment by UK firms. European Economic Review, 124. ISSN 0014-2921

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Identification Number: 10.1016/j.euroecorev.2020.103400

Abstract

We study the impact of the 2016 Brexit referendum on UK foreign direct investment. Using the synthetic control method to construct appropriate counterfactuals, we show that by March 2019 the Leave vote had led to a 17% increase in the number of UK outward investment transactions in the remaining EU27 member states, whereas transactions in non-EU OECD countries were unaffected. These results support the hypothesis that UK companies have been setting up European subsidiaries to retain access to the EU market after Brexit. At the same time, we find that the number of EU27 investment projects in the UK has declined by around 9%, illustrating that being a smaller economy than the EU leaves the UK more exposed to the costs of economic disintegration.

Item Type: Article
Official URL: https://www.journals.elsevier.com/european-economi...
Additional Information: © 2020 The Authors
Divisions: Centre for Economic Performance
Economics
Subjects: H Social Sciences > HG Finance
J Political Science > JN Political institutions (Europe)
JEL classification: F - International Economics > F1 - Trade > F15 - Economic Integration
F - International Economics > F2 - International Factor Movements and International Business > F21 - International Investment; Long-Term Capital Movements
F - International Economics > F2 - International Factor Movements and International Business > F23 - Multinational Firms; International Business
Date Deposited: 19 Feb 2020 14:45
Last Modified: 29 Jun 2020 23:26
URI: http://eprints.lse.ac.uk/id/eprint/103503

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