Impacts of Brexit on corporate productivity in the UK: a regionalism perspective

Abstract The nexus of Brexit-related uncertainty and corporate productivity in the UK has garnered sufficient attention while a regionalism perspective has also become important given the regional heterogeneity existing in this nexus. This paper documents spatiotemporal growth paths of corporate total factor productivity (TFP) in Wales, a typical UK country, during the period 2013–2019 divided by the 2016 Brexit Referendum. Using firm-level panel data, pooled OLS, fixed effect, and IV analysis, the author demonstrates that corporate TFP growth for firms in Wales was significantly weakened by Brexit-related uncertainty. Firms in South Wales and those with stronger EU-oriented characteristics are more adversely affected by Brexit. The author also conducts mechanism tests and finds that Brexit discourages corporate TFP through channels of establishing additional barriers to trade, FDI inflow, and international inward migration in Wales. PSM-DID analysis is then applied for comparative studies on firms in Wales and Brittany in France, two economically similar regions in Europe, with results similar to benchmark analysis outcomes.