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Trade Openness and FDI in the UK After Brexit

  • Tomasz M. NapiórkowskiEmail author
Chapter

Abstract

The aim of this study is to examine the possible effects that the UK’s decision to leave the European Union will have on its economy due to a change in the country’s attractiveness to foreign direct investment (FDI). The study focuses on openness to trade as a channel through which Brexit will impact inward FDI activity in the UK. After establishing the benefits of being an FDI host and the role of trade openness as one of the key determinants of inward FDI, the study finds that the relative attractiveness of the UK as a host of FDI has decreased as less of the world’s inward FDI is being directed at the UK. With a set of econometric tests, the study shows that the relationship between trade openness and inward FDI for the UK is positive and strong, and that the causality runs from trade openness to inward FDI, with no feedback. Therefore, the UK leaving the EU, through a fall in trade openness and therefore a fall in inward FDI, would have a significant negative impact on the UK’s economy.

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Copyright information

© The Author(s) 2018

Authors and Affiliations

  1. 1.Collegium of World EconomySGH Warsaw School of EconomicsWarsawPoland

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