The resilience of the British and European goods industry: Challenge of Brexit

Abstract

Abstract This is a study of the volume flexibility of the British and European goods industry, and its relative ability to cope with exogenous shocks, using the case of the Brexit process in a comparative context. It is located within the literature on comparative capitalism, and what it tells us in terms of how different institutional orders may be equipped to deal with such events. Using data for goods firms across 27 EU countries and the UK, we find that the UK goods industry has coped poorly with the shocks related to the Brexit process: its volume flexibility has declined. Brexit also has had an, albeit lesser, impact on the volume flexibility of their European firms counterparts. In particular, smaller firms in the EU coped better, a possible reflection of stronger institutional supports. However, firms that investing more in R&D, provide training to improve management efficiency, and apply innovation to improve asset efficiency, seem to be coping better. This study illustrates how the withdrawal of Britain from supra-national European institutions seems to have accentuated any negative effects of domestic institutions on firms, and, indeed, has had even worse consequences than the 2008 economic crisis for the British goods industry. The latter would suggest it is ill equipped to cope with further shocks, such as the 2020 pandemic. We draw out the implications for theorizing, policy and future research.