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Four years on, how has the Brexit vote affected the UK economy?

Higher import prices, reduced investment, slower growth. Trade & employment resilient

Evidence points to annual cost per person between £500 and £1000

Thread summarising academic literature to date (pre-covid) 1/

UK growth slowed after the referendum relative to other countries

Using synthetic control method, @bornecon, Mueller, @MSchularick & @SedlacekPe estimate loss of 2.1% of GDP by Q1 2019. This amounts to £45 billion per year or £700 per person 2/
GDP ctd.

Adopting similar approach, @JohnSpringford estimates GDP loss of 2.9% by Q2 2019.…

GDP growth slowdown started in 2017. Initially driven by lower private consumption, with reduced business investment also contributing from 2018 onwards 3/
Cost of living

Leave vote caused sterling to fall by around 10% raising import costs & consumer prices

Breinlich, Leromain, @DennisNovy & I estimate depreciation increased cost of living by 2.9% by Q2 2018, costing average household £870 per year… 4/

Depreciation increased price of imported inputs. Costa, @swatdhingraLSE & @s_machin_ show this led to declines in wages and training for workers in industries that experienced bigger price rises. No evidence of offsetting export price rises. 5/

Brexit uncertainty has reduced capital investment resulting in lower productivity and output

Bank of England Decision Makers Panel survey finds uncertainty reduced investment by 11% & productivity by 2%-5% by June 2019 @BoE_Research 6/
Investment ctd.

Hassan, @StephanHollan, @L_van_Lent & Tahoun measure uncertainty using firms' earnings conference calls. Find higher Brexit risk associated with lower investment & employment growth, but not related to sales growth. More here 👇

Foreign investment

Brexit vote has reduced number of new foreign investment projects in UK

Using synthetic control method, @ilonaserwicka &
@NTamberi @uk_tpo estimate referendum reduced new investment projects in UK by 16%-20% by July 2018 8/
Foreign investment ctd

Brexit vote increased outward investment projects from UK in EU. Breinlich, Leromain, @DennisNovy & I estimate vote led to 17% increase in new projects by UK firms in EU by Q1 2019. Increase driven by services, not manufacturing… 9/

Threat of higher tariffs has made firms less likely to trade with EU. @MeredithCrowle1, Exton & Han find reduced entry & increased exit in late 2016 for firm-product pairs more exposed to potential tariff increases. Entry down 5%, exit up 6.1% 10/
Trade ctd.

@AGGraziano, Limao & @KyleLHandley find Brexit uncertainty reduced UK-EU trade flows even before the referendum

@douch_m, @jundu1mecom & @EnricoVanino find evidence of trade diversion away from EU for smaller firms 11/
Trade ctd.

Broadbent Di Pace @td_econ Harrison & Tenreyro model Leave vote as news about a future growth decline in tradable sector. Depreciation then creates a temporary sweet spot for tradable producers before higher trade barriers come into effect 12/
Trade ctd.

EU's share of aggregate UK trade has remained stable since the referendum

Brexit yet to cause big changes to geography of UK trade


No sign the referendum outcome affected aggregate employment growth

But @BJavorcik, Kett, Stapleton & O'Kane do find evidence of fewer online job vacancies in regions more exposed to the threat of future increases in UK-EU trade barriers… 14/

Unlike trade, immigration patterns have shifted dramatically since the referendum. EU's share of net migration has fallen from over 50% in year to June 2016 to 15% in 2019 (data quality a concern here)

Not aware of a literature on this yet (suggestions welcome) 15/

Available evidence suggests Brexit vote has made the UK poorer.

GDP is likely between 1.5% and 3% lower than if the UK had voted to remain.

This amounts to an annual loss of £500-£1000 per person or £33 billion-£66 billion in aggregate 16/
Looking forward (speculative)

Full economic consequences of Brexit yet to materialise

Trade barriers will not change until transition period ends

Little is known about whether/how Brexit will interact with Covid-19

There is probably more to come 17/
Apologies to papers I've missed, it's a fast growing literature

Thanks to @ESRC @UKandEU @anandMenon1 & @CEP_LSE for funding many of these papers. Research is costly & this work would not have been possible with generous support 18/
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