Brexit Referendum and Business Investment in the UK

21 Pages Posted: 14 Jan 2019

Date Written: November 2018

Abstract

In this paper I apply firm-level analysis to examine how the Brexit process has affected business investment in the UK. An interaction term of potential trade costs after exiting the EU and a measure of firms' participation in global trade is used as a proxy for firm-level exposure to Brexit-related effects. The results suggest that potential trade costs have had a considerable and statistically significant negative impact on firm investment in the UK after the referendum. At the same time, the post-referendum sterling depreciation has likely contributed positively to investment expenditure by more foreign-oriented firms.

Keywords: Europe, United Kingdom, Brexit referendum, firm investment, uncertainty, trade costs, General, Country and Industry Studies of Trade

JEL Classification: D20, D80, F14

Suggested Citation

Górnicka, Lucyna, Brexit Referendum and Business Investment in the UK (November 2018). IMF Working Paper No. 18/247, Available at SSRN: https://ssrn.com/abstract=3314578

Lucyna Górnicka (Contact Author)

IMF ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

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