The Impact of the UK’s EU Exit on its Attractiveness to FDI and Associated Job Creation Effects. Department for the Economy, March 2019

Siedschlag, Iulia and Koecklin, Manuel Tong (2019) The Impact of the UK’s EU Exit on its Attractiveness to FDI and Associated Job Creation Effects. Department for the Economy, March 2019. [Working Paper]

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Abstract

This study examines possible Brexit effects on the UK’s attractiveness to greenfield foreign direct investment (FDI) and related job creation. Our results indicate that the UK would be less attractive as a location to FDI and would experience a reduction of FDI-related job creation in any of the considered Brexit outcomes. These effects come about through reduced market potential due to lower market size and reduced access to the EU Single Market. The least damaging post-Brexit outcome would be in the case of the UK’s membership in the European Economic Area (EEA) while the most damaging scenario would be the UK leaving the EU without a withdrawal agreement. Our results suggest that to compensate post-Brexit losses in terms of its attractiveness to FDI, the UK’s government could consider a more competitive corporate tax rate or spending more on education.

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