The Impact of Brexit on the Foreign Direct Investment in the UK

Table of Contents

1. Introduction

2. Summary of the working paper “The influence of Brexit on the Foreign Direct Investment Projects and Inflows to the United Kingdom” by Mihaela Simionescu

2.1. Introduction

2.2. Literature Review

2.3. Methodology

2.3.1. Gravity approach based on Mixed-effects poisson regression models

2.3.2. Differences-in-differences approach

2.4.Variables and Data

2.5. Results

2.6. Conclusion

2.7.Discussion

3. Summary of the paper “Brexit and foreign investment in the UK” by Nigel Driffield and Michail Karoglou

3.1.Introduction

3.2.Overview of the foreign direct investment time series literature

3.3.Importance of Brexit for foreign direct investment

3.4.The model

3.5.Data and econometric methodology

3.6. Results

3.7.Conclusions of the paper

3.8.Discussion

4. Conclusion

Objectives and Topics

This thesis examines the economic impact of Brexit on Foreign Direct Investment (FDI) in the United Kingdom by synthesizing and analyzing two key scientific working papers. The primary research goal is to investigate how the UK's withdrawal from the European Union influences FDI inflows, project numbers, and associated job creation, while also exploring potential mitigation strategies for the resulting economic challenges.

• Analysis of FDI determinants using gravity models
• Evaluation of differences-in-differences approaches to measure membership effects
• Impact of economic uncertainty and currency fluctuations on investment
• Comparison of the UK post-Brexit scenario with Northern European economic models
• Assessment of the role of the Single Market in attracting inward investment

Excerpt from the Book

Summary of Chapters

1. Introduction: This chapter contextualizes the Brexit referendum as a historic socio-economic turning point and outlines the thesis's focus on FDI impacts.

2. Summary of the working paper “The influence of Brexit on the Foreign Direct Investment Projects and Inflows to the United Kingdom” by Mihaela Simionescu: This section reviews the author's use of gravity models and differences-in-differences approaches to estimate the significant reduction in FDI projects and jobs post-Brexit.

3. Summary of the paper “Brexit and foreign investment in the UK” by Nigel Driffield and Michail Karoglou: This chapter analyzes the authors' findings regarding the role of economic uncertainty, currency volatility, and supply chain dependencies in shaping future FDI patterns.

4. Conclusion: The final chapter synthesizes the findings, concluding that Brexit poses substantial risks to UK FDI, and suggests that flexible labor markets and strategic trade alignments could partially mitigate these effects.

Keywords

Brexit, Foreign Direct Investment, FDI, United Kingdom, European Union, Economic Uncertainty, Gravity Model, Currency Fluctuations, Supply Chain, Trade Barriers, Labor Market, Economic Growth, Investment Inflows, SVAR-Model, Single Market

Frequently Asked Questions

What is the core focus of this bachelor thesis?

The thesis explores the impact of the UK's withdrawal from the EU on Foreign Direct Investment (FDI) by summarizing and contrasting two significant academic papers on the subject.

Which thematic areas does the work cover?

It covers the relationship between EU membership and FDI, the role of gravity models in trade analysis, the influence of economic and currency volatility, and empirical predictions for post-Brexit investment.

What is the primary research goal?

The goal is to quantify expected declines in FDI project numbers and inflows and to understand the mechanisms that drive these negative changes.

Which scientific methodologies are employed in the studied papers?

The research relies on Mixed-effects Poisson regression models, Differences-in-differences approaches, and Markov regime switching SVAR frameworks.

What core concepts are treated in the main section?

The main section discusses the role of supply chains, the importance of the Single Market for financial services, and how government policies might compensate for FDI losses.

Which keywords best characterize this work?

Key terms include Brexit, Foreign Direct Investment (FDI), Economic Uncertainty, Gravity Model, and Single Market.

How do the papers address the scarcity of historical precedents for leaving a trade union?

The authors acknowledge the lack of historical examples of countries leaving a major trade union and instead rely on sophisticated modeling of macroeconomic shocks and comparative analysis.

What recommendation does the thesis offer for the UK government?

The author suggests looking at Northern European nations like Norway and Iceland as models for maintaining investment attractiveness through flexible labor policies and competitive tax structures.