The Microeconomic Consequences of Brexit

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The proposed research intends to examine the effects of both Brexit and future possible trade agreements on a number of economic outcomes for the UK. There will be a strong focus on the effects at a local level on both individuals and firms. As a result we intend to draw a clear picture showing how the Brexit vote has actually affected different parts of the country, and what might happen to individual firms and workers in different regions as a result of our future engagement with the European Union and rest of the world.To date most analysis has focused on the broad effects of Brexit on the UK economy as a whole, but little attention has been given to the regional and local effects of various trade deal scenarios. As areas in the UK differ in terms of which type of industry dominate the local economy, it is likely that different trade deals will have differing effects on different regions. For example, finance is a leading sector in London while manufacturing is relatively small: conversely in the North East of England, the manufacturing sector dominates, while finance contributes little to the local economy. Given the regional disparity that exists in terms of employment and wages in the UK currently, it is vital to understand how trade agreements may alleviate or exacerbate the existing division.In particular this research intends to assess the longer term impact of various trade agreements on the living standards of individuals in different regions. This will be assessed through examining the likely impact on wages, the wage distribution, and prices for goods and services in local areas. Related to this is an investigation of the likely impact on firms, such as their productivity levels and an assessment as to whether factors such as firm size are important in determining local effects. It will also assess the shorter term impacts resulting from changes occurring immediately after the Brexit vote. For example, directly after the Brexit vote there was a depreciation of the pound and stock market valuations of certain companies changed. We will examine the impact of these two effects on regional outcomes such as wages, employment, and the prices of local goods and services.Ultimately, the main objective of the proposed research is to identify policies that would provide the greatest economic benefits to the UK in its engagement with the European Union and the rest of the world. We expect the findings of the project to provide robust evidence as to which trade policies can best take into account the needs of different regions and different sectors of the UK economy.