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Local Economic Effects of Brexit

Published online by Cambridge University Press:  01 January 2020

Swati Dhingra ,
Stephen Machin  and
Henry Overman
Swati Dhingra*
Affiliation:
Department of Economics and Centre for Economic Performance, London School of Economics
Stephen Machin*
Affiliation:
Department of Economics and Centre for Economic Performance, London School of Economics
Henry Overman*
Affiliation:
Department of Geography and Environment and Centre for Economic Performance, London School of Economics
*
e-mails: S.Dhingra@lse.ac.uk, S.J.Machin@lse.ac.uk
e-mails: S.Dhingra@lse.ac.uk, S.J.Machin@lse.ac.uk
e-mail H.G.Overman@lse.ac.uk
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Abstract

This paper studies local economic impacts of the increases in trade barriers associated with Brexit. Predictions of the local impact of Brexit are presented under two different scenarios, soft and hard Brexit, which are developed from a structural trade model. Average effects are predicted to be negative under both scenarios, and to be more negative under hard Brexit. The spatial variation in negative shocks across areas is higher in the latter case as some local areas are particularly specialised in sectors that are predicted to be badly hit by hard Brexit. Areas in the South of England, and urban areas, are harder hit by Brexit under both scenarios. Again, this pattern is explained by sector specialisation. Finally, the areas that were most likely to vote remain are those that are predicted to be most negatively impacted by Brexit

Keywords

BrexitEU and UKlocal economic impactstrade modelsF13F15F17R1
Type
Research Articles
Information
National Institute Economic Review , Volume 242 , November 2017 , pp. R24 - R36
Copyright
Copyright © 2017 National Institute of Economic and Social Research

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Footnotes

Thanks to Rui Costa, Nikhil Datta, Josh De Lyon and Hanwei Huang for excellent research assistance. This paper provides further methodological details and additional discussion of results first published in the CEP Brexit report by Dhingra, Machin and Overman (2017) and summarised in Clayton and Overman (2017). We thank Naomi Clayton and other researchers at the Centre for Cities for their help in producing those earlier reports. The Centre for Economic Performance (CEP) is a politically independent Research Centre at the London School of Economics. The CEP has no institutional views, only those of its individual researchers. CEP's Brexit work is funded by the UK Economic and Social Research Council. As a whole the CEP, receives less than 5 per cent of its funding from the European Union. The EU funding is from the European Research Council for academic projects and not for general funding or consultancy.

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