Published: 15 Dec 2024
This paper examines the impact of Brexit-related uncertainty on the UK’s trade in services, with a focus on how different types of international business policy uncertainty (IBPU) influence export participation and intensity. Leveraging a novel conceptual framework, we integrate multiple layers of uncertainty—including regulatory, legal, and market-based factors—into an analysis of UK firms’ strategic decisions in an open economy. Drawing on firm-level data from Bureau van Dijk’s Orbis database and a synthetic control method, we estimate that Brexit uncertainty led to a 9.2% annual reduction in UK services exports, equivalent to a cumulative loss of USD 146.8 billion between 2016 and 2019. Our findings show that Brexit-related uncertainty disproportionately affected small and medium- sized enterprises (SMEs), while multinational enterprises (MNEs) were more likely to relocate operations outside the UK, exacerbating trade declines. This research highlights the critical role of transparent and predictable regulatory frameworks, risk management policies, and transitional support measures to mitigate the adverse effects of prolonged uncertainty. By identifying the specific mechanisms through which uncertainty shapes export decisions, this study offers key insights for policymakers aiming to foster resilience in the UK’s services trade post-Brexit.