More than three years after the unexpected result of the Brexit vote in June 2016, no withdrawal agreement has yet been signed between the United Kingdom and the European Union. The terms under which Brexit will take place and its economic consequences remain unknown, but the referendum is already having a measurable impact on the real economy. The vote and the lengthy negotiations that followed represent a prolonged shock of uncertainty, which has affected firms’ investment decisions.
In this paper, we use detailed trade data from before and after the vote to measure the impact of the vote on French exports to the United Kingdom. We show that, on average, the referendum had no effect on the value of exports but reduced export growth in sectors such as transport equipment and chemicals, which are positioned further upstream in the value chains. The number of new trade relationships involving French exporters and UK importers declined significantly after the Brexit vote, compared with other destinations. The shock of uncertainty appears to have reduced French firms’ investment in business development, which is likely to penalise exporters in the future. These findings suggest that uncertainty represents a real cost. Any decision to delay Brexit must take into account not only the possibility of securing a better deal but also the economic cost resulting from prolonged uncertainty. It is also important that the forthcoming trade agreement between the UK and the EU establishes a trade policy that European exporters can anticipate, and whose stability is guaranteed by the agreement.
