Brexit Referendum and Business Investment in the UK
21 Pages Posted: 14 Jan 2019
Date Written: November 2018
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: Suggested Citation