United Kingdom’s exports following Brexit

Abstract: This paper investigates the effects of Brexit on export performance of the United Kingdom towards the rest of the EU15. It does so by first establishing a “hard Brexit” as the probable outcome. Using the gravity model it then establishes the effect of variables such as distance and GDP per capita on exports. These effects are found by running the regression on a sample of four non-EU countries during the period 1995-2012. This regression results in fitted values that when adapted to the United Kingdom estimates potential exports. These potential exports are significantly lower on average than actual exports during the time period. If the trend continues the United Kingdom would face a 2% reduction of relative trade on average due to trade effects of Brexit.