Abstract
Any form of Brexit will impact heterogeneously in terms of sectors and regions on the competitive position of firms in both the UK and Europe. The ongoing uncertainty about the conditions under which the UK will be leaving the EU creates difficulties in structurally estimating these impacts. Using uniquely detailed interregional trade data on goods and services for the EU, we apply a novel methodology that disentangles region-sector sensitivities (elasticities) of firms’ competitive positions to (non)tariff barriers from the implications of different post-Brexit UK–EU trade scenarios. This enables us to derive the economic geography of competitive opportunities and vulnerabilities of Brexit of firms, along with the degree of uncertainty that surrounds these effects, independently from scenarios. Our analysis demonstrates that the adverse international competitive vulnerabilities of UK regions are much larger than those of the rest of the EU due to the dependency of the UK on the EU via global value chains. The impact on the competitive positions of firms means that within the UK, Brexit is likely to increase interregional inequalities. In contrast, interregional inequalities across Europe may actually fall, depending on the nature of the post-Brexit UK–EU trading arrangements. Moreover, the key political focus on the nature of the post-Brexit arrangements appears to be misplaced in that most UK regions are rather insensitive to the specific nature of the deal. As such, the economic geography implications of Brexit appear to be largely unrelated to UK domestic political narratives.
Highlights
Any form of Brexit will impact heterogeneously in terms of sectors and regions on the competitive posi tion of firms in both the UK and Europe
Using uniquely detailed interregional trade data on goods and services for the EU, we apply a novel methodology that disentangles region-sector sensitivities of firms’ com petitive positions totariff barriers from the implications of different post-Brexit UK–EU trade scenarios. This enables us to derive the economic geography of competitive opportunities and vulner 1 abilities of Brexit of firms, along with the degree of uncertainty that surrounds these effects, independently from scenarios
The very short time period for negotiating a new agreement, along with the position set out by the UK government in early 2020, strongly suggests that the final UK–EU trading arrangement will be akin to something like a more limited version of the EU–Canada trade agreement or even the more distant EU–Australia agreement, if not a default to a so-called hard Brexit, which involves the UK reverting to World Trade Organization (WTO) trade rules (UK Trade Policy Observatory 2016; Stojanovic 2018; O’Carroll 2020; Peston 2020; The Economist 2020), a scenario that will bring many challenges with it
Summary
Thissen, Mark; van Oort, Frank; McCann, Philip; Ortega Argiles, Raquel; Husby, Trond. Document Version Publisher's PDF, known as Version of record Citation for published version (Harvard): Thissen, M, van Oort, F, McCann, P, Ortega Argiles, R & Husby, T 2020, 'The implications of Brexit for UK and EU Regional Competitiveness', Economic Geography.
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Disclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.