The impact of economic policy uncertainty caused by the Brexit referendum on aggregate and sectoral-level FDI into the UK
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2020-07-10
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en
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This paper performs a time-series and a fixed-effects panel data analysis to investigate the effect of economic policy uncertainty, caused by the Brexit referendum, on aggregate and sectoral-level FDI into the UK for the period 2010-2019. In general, on average, the number of M&A projects decreases by 1,041% after Brexit. A 1% increase of EPU will cause the number of M&A projects to decrease by 0,173% before Brexit; however, after the referendum, an 1% increase of EPU will cause the number of M&A projects to increase by 0,049%. A similar effect is observed on the sectoral model: On average, there are 12,45 less M&A projects per sector after Brexit than before. However, after Brexit, a 1% rise in EPU will result in a rise of 2,697 M&A projects. The positive moderating effect of Brexit can be attributed to firms’ conceptions. The service sector consistently has a higher number of M&A disinvestment compared to the primary and manufacturing sectors. When EPU increases by 1%, the service sector has an average reduction of 0,639 M&A projects more than non-service sector. Banks and Insurance sector is the most affected by the referendum due to potential changes in the regulations regarding the EU market.
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Faculteit der Managementwetenschappen