The impact of the Brexit referendum on UK's value-added exports: A structural decomposition

This article uses for the first time inter-country input-output data and a structural decomposition method to assess the impact of the 2016 Brexit referendum on the United Kingdom's value-added exports. We find that final demand explains less than 30% of the 6.9-point decline in the UK's value-added exports in 2016 (with a market share loss that offset the positive impact of global demand), whereas more than 70% was due to extraordinary changes in input sourcing decisions of the rest of the world. This means that the UK's value-added exports were structurally affected by the weakening of the linkage effects of providing inputs to the rest of the world, especially to the EU. This article paves the way for further analyses of the structural effects of Brexit and other trade and industrial policies that alter the international allocation of inputs. (c) 2023 Economic Society of Australia, Queensland. Published by Elsevier B.V. This is an open access article under the CC BY-NC-ND license (http://creativecommons.org/licenses/by-nc-nd/4.0/).

Automated summary

This article evaluates for the first time the impact of the 2016 Brexit referendum on the United Kingdom's value-added exports using inter-country input-output data and a structural decomposition method. The study finds that less than 30% of the decline in the UK's value-added exports in 2016 can be attributed to final demand, while more than 70% was due to significant changes in input sourcing decisions of other countries. This suggests that the structural effects of providing inputs to the rest of the world, especially the EU, have weakened the UK's value-added exports. The article sets the stage for further analysis of the structural effects of Brexit and other trade and industrial policies that influence the international allocation of inputs.