Discussion Paper Details

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Title: Voting with their Money: Brexit and Outward Investment by UK Firms

Author(s): Holger Breinlich, Elsa Leromain, Dennis Novy and Thomas Sampson

Publication Date: July 2019

Keyword(s): Brexit, Foreign direct investment and synthetic control method

Programme Area(s): International Trade and Regional 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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Bibliographic Reference

Breinlich, H, Leromain, E, Novy, D and Sampson, T. 2019. 'Voting with their Money: Brexit and Outward Investment by UK Firms'. London, Centre for Economic Policy Research.