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/
GDP

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

https://tinyurl.com/y785jp2u ">https://tinyurl.com/y785jp2u&... 2/
GDP ctd.

Adopting similar approach, @JohnSpringford estimates GDP loss of 2.9% by Q2 2019.
https://www.cer.eu/insights/cost-brexit-june-2019

GDP">https://www.cer.eu/insights/... 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

http://cep.lse.ac.uk/pubs/download/dp1667.pdf">https://cep.lse.ac.uk/pubs/down... 4/
Wages

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. https://tinyurl.com/yaaradyp ">https://tinyurl.com/yaaradyp&... 5/
Investment

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

https://tinyurl.com/y9oowrdv ">https://tinyurl.com/y9oowrdv&... 6/
Investment ctd.

Hassan, @StephanHollan, @L_van_Lent & Tahoun measure uncertainty using firms& #39; earnings conference calls. Find higher Brexit risk associated with lower investment & employment growth, but not related to sales growth. More here https://abs.twimg.com/emoji/v2/... draggable="false" alt="👇" title="Rückhand Zeigefinger nach unten" aria-label="Emoji: Rückhand Zeigefinger nach unten">

https://twitter.com/thom_sampson/status/1225154198376984577">https://twitter.com/thom_samp... 7/
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

https://preview.tinyurl.com/y8s58285 ">https://preview.tinyurl.com/y8s58285&... 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 https://www.sciencedirect.com/science/article/pii/S0014292120300325">https://www.sciencedirect.com/science/a... 9/
Trade

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% https://tinyurl.com/ybepolkd ">https://tinyurl.com/ybepolkd&... 10/
Trade ctd.

@AGGraziano, Limao & @KyleLHandley find Brexit uncertainty reduced UK-EU trade flows even before the referendum https://tinyurl.com/y73cs6au 

https://tinyurl.com/y73cs6au&... href="https://twitter.com/douch_m">@douch_m, @jundu1mecom & @EnricoVanino find evidence of trade diversion away from EU for smaller firms https://tinyurl.com/ydcgkff5 ">https://tinyurl.com/ydcgkff5&... 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

https://tinyurl.com/yd2wvgt5 ">https://tinyurl.com/yd2wvgt5&... 12/
Trade ctd.

EU& #39;s share of aggregate UK trade has remained stable since the referendum

Brexit yet to cause big changes to geography of UK trade

https://twitter.com/thom_sampson/status/1265894427861671936">https://twitter.com/thom_samp... 13/
Employment

No sign the referendum outcome affected aggregate employment growth

But @BJavorcik, Kett, Stapleton & O& #39;Kane do find evidence of fewer online job vacancies in regions more exposed to the threat of future increases in UK-EU trade barriers

https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3518560">https://papers.ssrn.com/sol3/pape... 14/
Immigration

Unlike trade, immigration patterns have shifted dramatically since the referendum. EU& #39;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/
Summary

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& #39;ve missed, it& #39;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/
You can follow @thom_sampson.
Tip: mention @twtextapp on a Twitter thread with the keyword “unroll” to get a link to it.

Latest Threads Unrolled: