Mapping the UK Domestic and Global Value Chains from a Brexit Perspective

Abstract

The paper offers background information for a sectoral analysis of the Brexit implications on the UK value chains. It analyses trade data through the specific angle of inter-industrial relationships and international supply chains, including employment implications. Using a variety of analytical methods derived from input-output and network analysis, the paper benchmarks UK against other key G-20 countries for three specific industries that have a particular relevance from an inter-industrial perspective: Transport equipment, Chemicals and Electronics. In the process, a number of stylised facts are identified and several synthetic indicators are produced. Because a hard Brexit is expected to increase trade costs and affect prices, the paper estimates the impact of additional tariff and non-tariff trade costs on the competitiveness of these three sectors. Hopes that a devaluation of the Pound may compensate for higher trade costs must take into consideration that devaluation affects only the domestic share of the value-added, requiring larger exchange rate adjustment. In the case of Transport equipment, the required devaluation is about 30% if all tariff and non-tariff trade costs are passed to the producers.

Keywords: Brexit, international trade, global value chains, regional integration, input-output analysis, network analysis

JEL Classification: C43, C67, F14, F15, O50