VULNERABILITY TO THE CONSEQUENCES OF BREXIT: EVIDENCE FOR POLISH AND SPANISH REGIONS

Abstract

After the announcement in June 2016 that the UK would leave the EU, studies analysing the consequences of this reversal in economic integration have proliferated, mostly presenting prospective consequences for the UK economy. But Brexit will necessarily also have consequences for non-UK European countries and their regions. Given the different character and intensity of regions’ interconnections with the British economy, we assess Polish and Spanish regions’ vulnerability to Brexit in the sphere of foreign trade. We rely on the conceptual framework originally presented by Turner et al. (2003) comprising: exposure, sensitivity and resilience, which together describe the overall vulnerability to a specific phenomenon. We fill the gap in the Brexit-related literature by applying the perspective of the regions of other EU countries, engaged in trade relations with the UK. We show that geography “still matters” and due to gravity, path dependency and FDI, some regions have developed relatively stronger commercial links with the British economy. We expected to obtain the taxonomy or Polish and Spanish regions ‘mixed’ within the identified clusters of vulnerability. However, it is not the case, because clusters are mainly composed by Spanish or Polish regions, with a few exceptions, in which several Polish regions are accompanied by one or two Spanish regions. The results show greater vulnerability of Spanish (more exposed but better prepared) than Polish regions (more sensitive). While Brexit is rather perceived as a national problem, its asymmetrical impact on regions’ economy through the trade channel is a serious challenge for regional policy. It is therefore the role for regional institutions to monitor the vulnerability to the Brexit consequences and to facilitate adjustments to the exporting (and importing) companies that will be severely affected. They can be assisted in searching for the alternative export (import) markets.