The continental divide? Economic exposure to Brexit in regions and countries on both sides of The Channel

Abstract

In this paper we employ an extension of the World Input-Output Database (WIOD) with regional detail for EU countries to study the degree to which EU regions and countries are exposed to negative trade-related consequences of Brexit. We develop an index of this exposure, which incorporates all effects due to geographically fragmented production processes within the UK, the EU and beyond. Our findings demonstrate that UK regions are far more exposed than regions in other countries. Only regions in the Republic of Ireland face exposure levels similar to some UK regions, while the next most affected regions are in Germany, The Netherlands, Belgium and France. This imbalance may influence the outcomes of the negotiations between the UK and the EU. KEYWORDSBrexit, input-output analysis, regional differences, trade, value chains | INTRODUCTIONSince the UK decided in 2016 by referendum to leave the European Union there has been a large and growing body of material explaining the reasons for the decision in both the academic arena as well as in the popular press. In contrast, there has been much less post-referendum material emerging regarding the likely long-term impacts of this decision, and there are probably two main reasons for this. First, there were various forecasts produced by different organizations prior the -------------------------------------------------------------------------------------------------------This is an open access article under the terms of the Creative Commons Attribution License, which permits use, distribution and reproduction in any medium, provided the original work is properly cited. referendum which predicted a rapid UK recession immediately following the decision to leave, and this has simply not transpired. Although there is now emerging evidence of the effects of a devalued Sterling on UK inflation and living standards (Financial Times, 2017a), as well as a fragile trade balance even under currency depreciation, the fact that no UK recession has so far materialized (The Economist, 2017) probably makes many forecasters rather loathe to speculate any further.Second, and more importantly, Brexit has not yet actually happened, and it is very difficult to speculate in detail about the likely long-run impacts of Brexit until the specific outlines of the new UK-EU trading relationships become clear.What we aim to analyse here is the exposure of regions in the UK and the EU to Brexit, via an analysis of the nature and scale of their trade linkages. Other potential advantages and disadvantages, for example as a consequence of the relocation of UK subsidiaries of multinational firms or the redistribution of subsidies to regions are not considered. 1 In this study, we intend to quantify the shares of regional and national GDP and labour income (in the UK and the EU) that are at risk due to Brexit. The extent to which these risks will actually materialize, for example via tariffs and non-tariff barriers to trade between the EU and the UK, will depend on the final agreements reached (if...

The macroeconomic impacts of future river flooding in Europe

“…To validate the outcomes, we can compare the results and model behavior with similar academic exercises (Bosello et al 2012, Carrera et al 2015, Oosterhaven and Tobben 2017, Chen et al 2018, Willner et al 2018, but more research in this area is required. Our results show that some of the negative impacts can be offset by market adjustments through trade and substitution, resulting in lower indirect impacts compared to the direct impacts from asset damages.…”

“…Other studies show that indirect losses can even become twice as large as the direct damages (Koks et al 2015. Indirect losses become increasingly important because of the growth in regional production processes based on the Just-In-Time revolution in logistics and supply chains, in combination with (customized) demand and trade structures in Europe that stretch far beyond the flooded region (McCann 2010, Chen et al 2018. As a result, analyzing both the direct and indirect losses on a pan-European scale will result in a more complete picture of the possible total flood impacts.…”

Which manufacturing industries and sectors are most vulnerable to Brexit?

“…Across most regions, the reduction in labour demand is more 15 Analysing the pattern of UK regional services exports, Borchert and Tamberi (2018) find that regions such as the North East or the Midlands may potentially be more vulnerable to Brexit shocks because of the sectoral composition of their services exporters and their orientation towards EU markets. Chen et al (2018), who constructed index for the regional GDP exposure to Brexit, find that it is many of the UK's economically weaker regions which are especially exposed to Brexit, with GDP exposure to Brexit being highest in the Midlands and the North of England. 16 We accessed the LFS data using nesstar, an online analysis tool of the UK Data Service, where relevant weights have been applied.…”

Brexit? What the members of the Regional Studies Association think about Brexit

“…A significant majority of respondents (some 72%) felt that Brexit would exacerbate regional disparities within the UK. Perhaps this is unsurprising given the results of published research (Chen et al, 2018;Los, McCann, Springford, & Thissen, 2017). Nevertheless, given that the Association's membership would be expected to have an unusually high level of expertise in this field, this finding should cause concern amongst policymakers and ought to be a spur to action.…”