Feeding the Celtic Tiger – Brexit, Ireland and Services Trade

"Brexit shrank UK services by £110bn, says academics". So read a headline in the Financial Times - without linking to the study. So, here it is. The report studies the impact of the 2016 Brexit Referendum on the services trade of the UK and Ireland. Using the synthetic control method, we show that in 2016-2019, on average, the UK has been losing 9.2% of services exports or 36.7 billion USD every year. This amounts to 146.8 billion USD between 2016-2019 in total (113.1 billion GBP based on annual average exchange rates). By contrast, Ireland is the big winner of Brexit. We show that, over the same period, Ireland on average has boosted its services exports by 23.6% or 41 billion USD every year, generating extra export value of 164.1 billion USD (144.2 billion EUR / 125.7 billion GBP based on annual average exchange rates) in total relative to the counterfactual scenario in which Brexit did not happen. The effect is similar for the UK and even more pronounced for Ireland when using the synthetic control method on the quarterly data and difference-in-difference analysis.