The Long Shadows of Brexit: Implications for African Countries

Abstract

The exit of the United Kingdom from the European Union (EU) single market and customs union has adversely affected trade prospects of many developing economies that depended on the UK market for their exports. This paper investigates the impact of Brexit on African countries' exports to the UK. The comparison is based upon trade between the set of African countries which export most to the UK and the EU. It provides a quantitative assessment of the trade effect through the use of descriptive analysis and empirical estimations by employing the difference-in-difference (DID) estimation approach. The descriptive analysis finds that the share of African exports sent to the UK has declined since the Brexit announcement in 2016. The empirical estimations using the DID approach also demonstrate a drop of 20–30% in African countries exports to the UK relative to the EU-27 in this period. These results hold to a battery of robustness checks, including the use of an alternative estimation approach, varying sample size, and the use of alternative counterfactuals. We further show that the trade flows started to drop immediately after the announcement of the Brexit referendum in 2015 but the main drop came after the Brexit referendum results became evident. These findings imply the need for policy intervention and support for African countries to revitalize their trade flows and alleviate the unintended effects of this trade shock.