Deep integration and trade: UK firms in the wake of Brexit

Freeman, Rebecca, Garofalo, Marco, Longoni, Enrico, Manova, Kalina, Mari, Rebecca, Prayer, Thomas and Sampson, Thomas ORCID: 0009-0006-2237-5497 (2024) Deep integration and trade: UK firms in the wake of Brexit. CEP Discussion Papers (CEPDP2066). London School of Economics and Political Science. Centre for Economic Performance, London, UK.

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Abstract

How does dismantling deep integration affect international trade? This paper provides new evidence on the consequences of disintegration by estimating the impact of Brexit on goods trade by UK firms. The UK's exit from the EU's single market and customs union in January 2021 led to an immediate, sharp drop in both exports and imports with the EU for the average firm. In addition, many exporters and importers stopped trading with the EU entirely. However, heterogeneous firm-level responses to the implementation of trade barriers mitigated Brexit's impact on aggregate trade. The decline in exports was concentrated among smaller firms, but insignificant for the largest firms. Our estimates imply that, in the short run, leaving the EU reduced worldwide UK exports by 6.4% and worldwide imports by 3.1%. The fall in imports was driven by lower imports from the EU, which importers offset by sourcing more from the rest of the world.

Item Type:	Monograph (Discussion Paper)
Official URL:	https://cep.lse.ac.uk/_new/publications/discussion...
Additional Information:	© 2024 The Author(s)
Divisions:	Centre for Economic Performance Economics
Subjects:	H Social Sciences > HC Economic History and Conditions H Social Sciences > HF Commerce
JEL classification:	F - International Economics > F1 - Trade > F13 - Commercial Policy; Protection; Promotion; Trade Negotiations; International Trade Organizations F - International Economics > F1 - Trade > F14 - Country and Industry Studies of Trade F - International Economics > F1 - Trade > F15 - Economic Integration
Date Deposited:	13 Feb 2025 14:15
Last Modified:	13 Feb 2025 14:15
URI:	http://eprints.lse.ac.uk/id/eprint/126762

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