The decision by Great Britain (UK) to leave the European Union (EU) has produced widespread speculation about the effects of so-called “Brexit” on the ability of the country to attract inward foreign direct investment (FDI). The consensus is that inward FDI will initially increase because of a favorable foreign exchange effect but will then diminish because of the uncertainty surrounding the exit negotiations between the UK and the EU relating to the terms of the divorce.
It is the contention of this paper that the damaging effects on FDI inflows will be greater than the effects of uncertainty. Multinational enterprises (MNEs) will predictably react negatively to the expected loss of flexibility and control when operating subsidiaries in the UK are no longer able to move goods, services, resources and personnel totally free of constraints from the country to other venues in the EU community. Future post-Brexit negotiations will be vital in minimizing the expected damage of the decision to leave the EU on the British economy.
Brexit, Foreign Direct Investment (FDI), the European Union (EU), Multinational Enterprises (MNEs)