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UK trade in the wake of Brexit

Author

Listed:
  • Rebecca Freeman
  • Kalina Manova
  • Thomas Prayer
  • Thomas Sampson
Abstract
This paper studies the impact of Brexit on the UK's trade with the EU relative to its trade with the rest of the world. We find no evidence that uncertainty and anticipation effects led to a significant decline in relative UK trade with the EU during the period after the UK voted for Brexit in 2016 and before the change in policy was implemented under the new Trade and Cooperation Agreement (TCA) in 2021. However, the UK's departure from the EU's single market and customs union at the start of 2021 caused a major shock to UK-EU trade. We estimate that the new TCA trade relationship led to a sudden and persistent 25% fall in relative UK imports from the EU. In contrast, we find a smaller and only temporary decline in relative UK exports to the EU, but nevertheless a large and sustained drop in the extensive margin of exports, driven by the exit of low-value relationships. The timing and asymmetry of Brexit effects on UK imports and exports is puzzling and provides evidence of important differences in adjustment to integration and disintegration shocks.

Suggested Citation

  • Rebecca Freeman & Kalina Manova & Thomas Prayer & Thomas Sampson, 2022. "UK trade in the wake of Brexit," CEP Discussion Papers dp1847, Centre for Economic Performance, LSE.
    • Handle: RePEc:cep:cepdps:dp1847
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    References listed on IDEAS

    as
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    Cited by:

    1. de Lucio, Juan & Mínguez, Raúl & Minondo, Asier & Requena, Francisco, 2024. "The negative impact of disintegration on trade: The case of Brexit," European Economic Review, Elsevier, vol. 163(C).
    2. Swati Dhingra & Thomas Sampson, 2022. "Expecting Brexit," Annual Review of Economics, Annual Reviews, vol. 14(1), pages 495-519, August.
    3. Jelliffe, Jeremy & Gerval, Adam & Husby, Megan & Jarrell, Philip & Williams, Brian, 2023. "United Kingdom Agricultural Production and Trade Policy Post-Brexit," USDA Miscellaneous 333547, United States Department of Agriculture.
    4. Bakker, Jan & Datta, Nikhil & Davies, Richard & De Lyon, Joshua, 2022. "Non-tariff barriers and consumer prices: evidence from Brexit," LSE Research Online Documents on Economics 118040, London School of Economics and Political Science, LSE Library.

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    More about this item

    Keywords

    Brexit; EU; exports; trade policy; globalisation; imports; uncertainty;
    All these keywords.

    JEL classification:

    • F10 - International Economics - - Trade - - - General
    • F00 - International Economics - - General - - - General

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    This paper has been announced in the following NEP Reports:

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