How Brexit reshaped venture capitals market: An analysis of UK and EU investments

This study examines the distinct impacts of Brexit's announcement and enforcement on cross-region VC investments between the UK and the EU. The findings reveal contrasting trends for VC hubs in these regions. Following the Brexit announcement, UK VC hubs immediately reduced their investments in the EU, with no further changes after enforcement. Conversely, EU VC hubs did not alter their investment behavior toward the UK at the announcement but significantly increased their activity after Brexit enforcement. These results align with the hypothesis that UK and EU VC investors faced asymmetric uncertainty, with the EU being less equipped to anticipate how Brexit would reshape European VC markets. Our analysis is the first to offer a picture following Brexit enforcement, showing that, overall, UK VC hubs reduced their incidence on the EU market as well as in the domestic market. • Brexit impacted cross-region VC activity between UK and EU hubs. • Brexit impacted UK and EU VC hubs asymmetrically at announcement and enforcement. • UK hubs decreased activity post-announcement, but showed no change post-enforcement. • EU hubs showed no change post-announcement, but increased activity post-enforcement. • UK VC hubs reduced their share in the domestic market after Brexit enforcement.