Soft, Hard, or no Brexit: The Damage is Done

By Niccolò Pisani and Omar Toulan

Regardless of the final Brexit outcome, the damage to the UK has been done. In this paper, we look at five specific areas where this effect is evident: economic performance, investment confidence, talent attraction, reputational influence, and political effectiveness.


The drawn-out and ineffectual process to reach a solution has not only increased the anxiety over an uncertain outcome but also weakened the confidence in the government to be able to manage this or similarly complex issues.

While the doomsday scenarios first put forth following the Brexit referendum may not have come to fruition as of yet, the fact of the matter is that regardless of whether March 29th resulted in a soft, hard, or no Brexit outcome, the damage to the UK has been done. The drawn-out and ineffectual process to reach a solution has not only increased the anxiety over an uncertain outcome but also weakened the confidence in the government to be able to manage this or similarly complex issues. As such, the nearly 3 year lead up to Brexit has in itself resulted in a number of detrimental outcomes for the UK which can be categorised as impacting the nation’s: 1. Economic Performance; 2. Investment Confidence; 3. Talent Attraction; 4. Reputational Influence; and 5. Political Effectiveness.


1. Economic Performance

Whereas in the years leading up to the referendum the UK economy was experiencing solid economic growth of 2-3%, that trend has since reversed, dropping from 2.1% in Q1 of 2016 to 1.3% in Q4 of 2018.1 Cumulatively, it is estimated that the UK’s GDP is more than 2.5% smaller than it would have been had the referendum not happened. Business investment has likewise slowed and today stands at roughly 15% (or more than 6 billion pounds) below what it would have been had the trend of the previous years continued.2 This downward economic performance has been accompanied by an increase in inflation from less than 0.5% to over 2.5% during the same time period. This increase in inflation is in part due to the increased price of imports following the devaluation of the British pound which has reached a peak of nearly 20% against the euro post referendum.3


2. Investment Confidence

Not only has the UK slowed down economically, but its attractiveness as a destination for capital has also taken a hit. The above-mentioned reduction in investment is partially accounted for by a slowdown in inward foreign direct investment (FDI) into the UK, which while increasing by 6% in 2017, was below the European average of 10% and well below countries such as France which saw inward FDI increase by 31%. This allowed Paris to overtake London as the most attractive European capital for new investment. The result has been a drop in the UK’s share of European inward FDI from 21% to 18%. Hard hit amongst the different sectors of the economy has been the financial industry where banks have not only been moving jobs but also assets out of the country. US banking giants including Goldman Sachs, JP Morgan, and Citigroup have transferred over 250 billion euros of balance sheet assets to Frankfurt.4 This exodus is not restricted to foreigners, with Barclays transferring 166 billion pounds in assets to its Irish subsidiary. This is reflective of a broader trend by British firms to increase their investments into the rest of Europe, which grew by a record setting 35% in 2017. This reduction in the attractiveness of the UK as an investment destination is reinforced by a 25% reduction in the number of new firms locating their headquarters in the UK.5 The impact of these trends is not only fewer jobs and economic activity but also a drop in tax revenue for the government.

It comes as no surprise that international investors are hesitant when it comes to the UK real estate market, with many of the UK’s top 50 most shorted stocks in 2018 being associated with real estate investment trusts.

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About the Authors

Niccolò Pisani is Assistant Professor of International Management at the University of Amsterdam in the Netherlands. His research focuses on the international management domain and the topics of his scholarly enquiry range from global business strategy to international corporate social responsibility. His research has appeared in a variety of academic journals and practitioner-oriented outlets.

Omar Toulan is Professor of Strategy and International Management at IMD Business School in Switzerland. Professor Toulan holds his PhD from the Sloan School of Management at MIT. His areas of expertise include strategic management, international business, growth strategies, and managing the multinational. Prior to entering academia, Professor Toulan worked as a management consultant for McKinsey and Company, as well as a researcher at the U.S. President’s Council of Economic Advisers.



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2. Raphael, T. (2019). Brexit knocks the wind out of the U.K. economy. Bloomberg Opinion (January 19).

3. Raphael, T. (2019). Ibid.

4. Burroughs, C. (2019). Brexit isn’t even here yet, but here’s a list of the damage that’s already been done. Business Insider (February 5).

5. Ernst & Young (2018). UK remains top destination for inward investment, but Germany and France are closing the gap as Brexit bites. Ernst & Young Newsroom (June 11).

6. Reid, H. (2018). ‘Safe as houses’? Brexit looms over UK real estate market. Reuters (August 23).

7. Deutsche Welle (2019). EU Medicines Agency makes Brexit move to Amsterdam. Deutsche Welle Top Stories (January 9).

8. Reid, H. (2018). Ibid.

9. Raphael, T. (2019). Ibid.

10. Reid, H. (2018). Ibid.

11. Andrew, J. (2019). Top universities feel squeeze as EU student numbers drop: Higher education. Financial Times (January 3).

12. Fazackerley, A. (2018). 2VCs on … will Brexit damage UK universities? The Guardian (September 20).

13. More information and the complete list of the 24 leading US universities that are part of the Russell Group is available at:

14. Fazackerley, A. (2018). Ibid.

15.Gifkins, J., Ralph, J., Jarvis, S. (2018). Diplomats reveal concerns over UK’s waning influence on UN Security Council. The Conversation (September 26).

16. Statista (2019). Which of these statements best describes your opinion on the present system of governing Britain? Statista (Accessed February 10).

17. Stewart, H. (2019). May suffers heaviest parliamentary defeat of a British PM in the democratic era. The Guardian (January 16).


The views expressed in this article are those of the authors and do not necessarily reflect the views or policies of The World Financial Review.