The Implications of Brexit for UK and EU Regional Competitiveness

Tinbergen Institute Discussion Paper 2019-061/VIII

31 Pages Posted: 23 Aug 2019 Last revised: 18 Sep 2019

See all articles by Mark Thissen

Mark Thissen

PBL Netherlands Environmental Assessment Agency (The Hague)

Frank van Oort

Erasmus University Rotterdam (EUR) - Erasmus School of Economics (ESE)

Philip McCann

University of Reading - Department of Economics

Raquel Ortega-Argilés

University of Birmingham - Birmingham Business School, City REDI institute ; University of Groningen - Faculty of Economics and Business

Trond Husby

PBL Netherlands Environmental Assessment Agency (The Hague)

Date Written: September 5, 2019

Abstract

Any form of Brexit will impact heterogeneously in terms of sectors and regions on the competitiveness of firms in both the UK and Europe. The ongoing uncertainty about the conditions under which the UK will be leaving the EU, creates difficulties in structurally estimating these impacts. Using uniquely-detailed interregional trade data on goods and services for the EU, we apply a novel methodology that disentangles region-sector sensitivities (elasticities) of firms’ competitiveness to (non)tariff barriers from the implications of different post-Brexit UK-EU trade scenarios. This enables us to derive the impact of Brexit on the competitiveness of firms along with the degree of uncertainty that surrounds these impacts, independently from the scenarios. Our analysis demonstrates that the adverse international competitiveness shocks on UK firms are much larger than those on the rest of the EU due to the dependency of the UK on the EU via global value chains. The competitiveness shocks mean that within the UK, Brexit is likely to increase both interregional inequalities and also intra-regional inequalities. In contrast interregional inequalities across Europe may actually fall, depending on the nature of the post-Brexit UK-EU trading arrangements.

Keywords: Brexit, competitiveness, impact analysis, international trade, regional economics, IO analysis

JEL Classification: P25, R13, B27

Suggested Citation

Thissen, Mark and van Oort, Frank and McCann, Philip and Ortega-Argilés, Raquel and Husby, Trond, The Implications of Brexit for UK and EU Regional Competitiveness (September 5, 2019). Tinbergen Institute Discussion Paper 2019-061/VIII, Available at SSRN: https://ssrn.com/abstract=3440574 or http://dx.doi.org/10.2139/ssrn.3440574

Mark Thissen

PBL Netherlands Environmental Assessment Agency (The Hague)

Oranjebuitensingel 6
The Hague, 2511 VE
Netherlands

Frank Van Oort (Contact Author)

Erasmus University Rotterdam (EUR) - Erasmus School of Economics (ESE) ( email )

P.O. Box 1738
3000 DR Rotterdam, NL 3062 PA
Netherlands

Philip McCann

University of Reading - Department of Economics ( email )

Reading, RG6 6AA
United Kingdom
+44 (0)118 9314074 (Phone)

HOME PAGE: http://www.rdg.ac.uk/IEAS/staff/McCann.htm

Raquel Ortega-Argilés

University of Birmingham - Birmingham Business School, City REDI institute ( email )

Edgbaston Park Road
Birmingham, B15 2TY
United Kingdom

University of Groningen - Faculty of Economics and Business ( email )

Postbus 72
9700 AB Groningen
Netherlands

Trond Husby

PBL Netherlands Environmental Assessment Agency (The Hague) ( email )

Oranjebuitensingel 6
The Hague, 2511 VE
Netherlands

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