The impact of the brexit referendum on greenfield foreign direct investments from countries within and outside the European single market

Abstract

ABSTRACT We use a Poisson Pseudo Maximum Likelihood (PPML) specification to investigate whether the number of greenfield foreign direct investments (GFDIs) announcements in the UK decreased from the referendum year and, if so, whether the decrease is more pronounced for announcements made by investors outside the European Single Market (ESM) than for those by investors within the ESM. In this context, we argue that increased uncertainty about the UK’s future economic relationship with EU began early in the referendum year and affected investors outside the ESM more than investors inside the ESM. One possible reason for this heterogeneity could be, among others, that not following the ‘Norwegian Model’ after the implementation of the withdrawal agreement poses a greater threat to them, since they tend to use the UK more often as an export platform. For the analysis, we use data from fDi Markets, the World Bank and the Tax Foundation, which contain information on 185 countries from 2005 to 2019. The results obtained support our hypotheses and are robust to model specifications.