Brexit and investment

Norris Keiller, Agnes (2024) Brexit and investment. CEP Discussion Papers (CEPDP2025). London School of Economics and Political Science. Centre for Economic Performance, London, UK.

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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.

Item Type:	Monograph (Discussion Paper)
Official URL:	https://cep.lse.ac.uk/_new/publications/discussion...
Additional Information:	© 2024 The Author
Divisions:	Management
Subjects:	H Social Sciences > HC Economic History and Conditions H Social Sciences > HF Commerce
JEL classification:	F - International Economics > F1 - Trade > F14 - Country and Industry Studies of Trade L - Industrial Organization > L6 - Industry Studies: Manufacturing > L60 - General F - International Economics > F5 - International Relations and International Political Economy > F50 - General D - Microeconomics > D2 - Production and Organizations > D20 - General
Date Deposited:	24 Feb 2025 10:57
Last Modified:	11 Sep 2025 05:20
URI:	http://eprints.lse.ac.uk/id/eprint/126796

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