Voting with their money: Brexit and outward investment by UK firms

Holger Breinlich Y · Elsa Leromain · Dennis Novy · Thomas G. Sampson

76 citations0/0 files storedEuropean Economic Review

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International Business and FDI Corporate Finance and Governance Global trade and economics

Abstract

We study the impact of the 2016 Brexit referendum on UK foreign direct investment. Using the synthetic control method to construct appropriate counterfactuals, we show that by March 2019 the Leave vote had led to a 17% increase in the number of UK outward investment transactions in the remaining EU27 member states, whereas transactions in non-EU OECD countries were unaffected. These results support the hypothesis that UK companies have been setting up European subsidiaries to retain access to the EU market after Brexit. At the same time, we find that the number of EU27 investment projects in the UK has declined by around 9%, illustrating that being a smaller economy than the EU leaves the UK more exposed to the costs of economic disintegration.

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References

2003The Economic Costs of Conflict: A Case Study of the Basque Country 2004Export Versus FDI with Heterogeneous Firms 2014Comparative Politics and the Synthetic Control Method 1993An Empirical Assessment of the Proximity-Concentration Tradeoff between Multinational Sales and Trade 2017The costs and benefits of leaving the EU: trade effects 2019The Costs of Economic Nationalism: Evidence from the Brexit Experiment*2002Tariff-jumping antidumping duties 2019The Impact of Brexit on UK Firms

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