Free DP Download 16 July 2020 - MEASURING THE REGIONAL ECONOMIC COST OF BREXIT: Evidence up to 2019

Thursday, July 23, 2020

THE REGIONAL ECONOMIC COST OF BREXIT: Sizeable, uneven, and concentrated in Leave voting regions  
Thiemo Fetzer and Shizhuo Wang         
CEPR DP No. 15051 | July 2020

New regional data finds that the economic costs of the Brexit-vote are sizeable and far from evenly distributed across the United Kingdom. Almost half of the UK’s regions appear to be Brexit-vote losers, having lost on average 8.54 percentage points of output in 2018. Those hit hardest appear to be districts who largely supported Leave in 2016, with concentrations of reduced output in regions with high manufacturing activity and relatively low levels of human capital. 

These are the central findings of a new CEPR paper by Thiemo Fetzer and Shizhuo Wang, which provides some of the first insights into the regional economic impact of Brexit to date. Among the findings: 

  • The results confirms existing work that has estimated that by 2018, Brexit has cost the UK economy at least two percent of real output.
  • The economic costs of the Brexit-vote are sizeable and far from evenly distributed across the UK. 
  • Among 382 districts, at least 168 districts appear to be Brexit-vote losers, having lost, on average 8.54 percentage points of output in 2018 compared to their respective synthetic controls. 
  • Economic losses are increasing in districts who supported Leave in 2016 
  • Economic losses are concentrated in districts with notable employment or gross-value added activity in manufacturing
  • Losses are also concentrated in districts with a resident population with relatively low levels of human capital. 

In sum, the Brexit-vote induced economic divergence across regions is already exacerbating regional economic inequalities that became so apparent in the 2016 EU referendum vote patterns. Further, there is some evidence suggesting that the regional economic impact of Covid-19 may exacerbate the regional economic impact of the Brexit-vote to date.


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