Russ Woodward and Tim Veal advocate a less emotive approach to evaluating the impact of Britain’s departure from the European Union


While numerous aspects are to be finalised, it is fair to say that Brexit and the Brexit vote 2016 gives rise to the biggest development in the UK business environment for many decades, i.e. that of (almost certain) departure from the European Union, EU.

It is also accurate to say that much of the referendum debate of 2016 was of fairly poor and limited quality as far as business economics impact was concerned. The political and emotive aspects, while important, somewhat overrode the business economics to the extent that even within themes of business economic relevance – practical elements were unable to strongly come through and the issues were easy to draw into the emotive sphere. In the context of finance, the fairness/bias of the UK net contribution was put centre stage, as well as NHS direction of Brexit related savings; when considering the EU’s free movement requirement, the migration issue received a very emotive treatment; in terms of EU decision making, the supremacy of the European Court of Justice jurisdiction over British laws and courts was the focus. On themes where specific business economic concerns were raised and linked to Brexit, they were frequently packaged as project fear – or as evidence of undue pessimism about the robustness of the UK economy to cope with the likely impact of EU departure. The other area in which genuine economic and trade issues were discussed was with regard to the UK trade balance. It was a staple argument of some of the leave proponents that the UK’s substantial trade deficit in goods with Europe gave Britain relative strength in any post-Brexit trade talks. However, these arguments were marginal compared to the social-political concerns highlighted.

Perhaps the greatest evidence that suggests the debate was ultimately shaped by matters such as migration rather than economics are the opinion polling numbers. From the beginning of 2016, the Remain campaign held a steady lead in most polls as the focus was primarily on the dislocation Brexit may cause. On May 26th, the Office for National Statistics (ONS) produced their figures depicting a rise in net migration to 330,000 for the previous year (BBC, 2016). This provided an opportunity for the Leave campaign to capitalise and announce their intention to implement an Australian-style points system post-Brexit. Three weeks later, Leave were consistently ahead in seven opinion polls (Curtice, 2016). Many political and economic commentators have suggested this provided a turning point in the campaign which put the status-quo on the back foot.

Existing Teaching Resources and Business Education Comment on the Brexit Issue

With regard to teaching and learning, e.g. guidance and resources – difficulties have endured as far as the business economics perspective is concerned. While more is said about higher education institutions and Brexit coverage later, the enquiry/investigation into who at University level has been teaching modules involving Brexit suggests that a dispassionate approach – even in parts – may be hard to pursue.

Looking at school and FE resources and guidance, the bulk of what was provided during the debate and subsequently, for example through the Times Education Supplement have focussed concern on overarching issues – e.g. history and citizenship, or framework guidance on in class debate activities where the content of points is left to the students/pupils to research. Even in the Economist Foundation resources for the TES on Brexit, TES (2016) – in the economics section – placed alongside migration and sovereignty sections – there is reference to arguable trade and business location impacts of Brexit, but no theory – elementary or sophisticated – onto which to thread these points. At the same time, in the months following the Brexit vote, education media have asserted to those pursuing the highest level of business education, i.e. MBA, that an understanding of how Brexit may play out for the UK in business economics terms could be key to graduate employability and job success (FT, 2017).

The Practical Theory Proposed

As a way of moving matters forward and equipping argument whichever side of Brexit/Remain is favoured, it is advocated here that a fairly practical and uncontentious piece of conceptual economics is deployed to the issue, i.e. theory surrounding Foreign Direct Investment, FDI. As noted in the majority of business economics texts FDI denotes commercial investment into another country of a sort that involves creation – or expansion – of tangible business activities there, e.g. factories, offices, mines, restaurants, shops.

In terms of underpinning theory, while through the years there has been debate as to the main drivers of FDI – for teaching at most levels an eclectic paradigm model of three determinant features has been arrived upon in practical terms. The eclectic paradigm – most frequently associated with Dunning (1981), combines the following features.

O Ownership Specific Advantages, i.e. strengths of the firm(s) involved, to show why they are active in the FDI and the sector.

L Location Specific Advantages, i.e. strengths of the place in which the FDI is located.

I Internalisation Specific Advantages, i.e. reasons why the activity stages in the FDI chain, both the home country FDI source activity and the host country FDI destination activity, are under one firm rather than separate supply chain participant firms.

It is suggested here that this paradigm – with real and/or hypothetical examples – be applied to the UK under EU membership and Brexit scenarios.

As economic theories and models go, the OLI paradigm is not only practicable in a ground level way, but also avoids some of the problems that a lot of economics content entails for business students; examples here would include the need for deriving marginal optimisation solutions, as well as the requirement for ceteris paribus – other things being constant – assumptions at numerous stages. These aspects have been noted over the years by practitioners as blockage aspects for business students studying economics content (see Simatele, 2010).

In terms of pre requisite content ahead of application, noted here are the business basics of what EU/Brexit means, i.e. participation in/departure from:

  • Customs Union (with defining coverage)
  • Single Market (with defining coverage)
  • Common Policies – which here refers to a swathe of EU common policies taking the form of both specific support and particular regulations, e.g. EU Enterprise Policy for SMEs, and most famously EU Common Agricultural Policy for farmers.

In terms of example application of OLI in UK/EU setting – an often taught real world scenario is that of Japanese car FDI into the UK. This is a very reasonable and fair example to use as the Conservative government in the late 80s incentivised investment precisely on the access to the single-market the UK offered. While the firm strengths – Ownership Specific Advantages pertain to features of the Japanese companies themselves (Nissan, Toyota, Honda: Brand, Technology, Management Methods), it is the L Location specific advantages and I Internalisation specific advantages for which EU membership/departure may be pivotal.

For UK within the EU, L would include access to the large mainly affluent EU integrated market, and I would include production/assembly by the firms inside the UK satisfying EU rules of origin for avoidance of tariff costs. Other considerations may include the UK as a more competitive location in terms of corporation taxation and regulation, something some more vocal Brexit supporters have suggested could be relaxed further.

One notes here that Brexit as SEM and CU departure would jeopardise the stated L and I advantages for the UK to receive inward FDI from Japanese automobile firms. Ability to apply a piece of practical business economics theory to the EU/Brexit issue in a way which – among other things – helps make sense of business stories emerging in the quality media, should help students at all levels to develop confidence on the topic in business studies terms.


A Balanced Approach

It is noted that over the years numerous examples have been used to apply eclectic OLI theory to FDI into the UK – with Britain being part of the EU, and previously the European Community. As such there is a wealth of resources and experience in the topic which de facto point to EU membership as key to inward FDI and thus imply the likely detrimental effects of Brexit. In view of this it is strongly advocated that teaching staff gives scope for any countervailing FDI forces that may exist to come through. For example, in the Japanese car FDI setting, recognition that several other (non-EU) L location advantages may make the UK attractive, i.e. a very skilled workforce in the sector, and the importance of the UK market in itself. More widely there should be scope for debate as to whether EU membership is necessarily locationally advantageous for FDI, e.g. the above noted regulation of EU common policies may be depicted as burdensome (though key to EU market access), with departure itself giving location advantage. Most ambitiously – there should be consideration of the potential for UK trade policy achievements outside of the EU, e.g. application of FDI theory to a UK that is part of a US led free trade area would bring its own locational and internalisation advantages.


Links to Existing Projections, Impact Documents and Analyses

In relation to the most advanced – though in many respects accessible for multiple levels, it is the view of the authors here that the most courageous and effective projection/impact work on Brexit, including with regard to FDI, by eminent educational institutions to date is the London School of Economics Centre for Economic Performance documents, produced very promptly after the Brexit vote. Other eminent sources have of course produced important work, e.g. an edition of OXREP (Oxford Review of Economic Policy) with a variety of articles focussed on Brexit (OXREP, 2017). From the same university, the award winning and accessible blog page ‘Mainly Macro’ by Simon Wren-Lewis often turns very effectively to the Brexit debate. Nonetheless as a cohesive set of organised, focussed and directly informative papers, the LSE (2016) impact work is most strongly highlighted here. Drawing directly back to the Brexit FDI theme of this article, the Executive Summary of the LSE’s Foreign Investment impact paper is a useful and accessible support resource for school, college and HE teaching and learning on the topic.

In terms of Brexit impact resources by commercial organisations now in the public domain, the work by KPMG (2017) is interesting – including the UK sectoral analysis of EU labour market exposure and EU trade exposure, in that it is well oriented to the key elements of Customs Union and Single Market (and departure therefrom) as well as being pictorially informative and accessible on those specific sectors.


Reflections, including Teaching, Learning and Curriculum Theory

In addition to bringing business sense to the coverage of Brexit, while avoiding some of the emotive political aspects and the undesirable abstraction aspects of economics, it is reflected here that the eclectic OLI paradigm of FDI constitutes a threshold concept in business economics in the criteria model originated by Meyer and Land (2003). The OLI model itself makes transformative sense of practicality and brings several key aspects together. The integrative aspect of OLI should be noted as going further in business economics in that Ownership Specific Advantages can be linked to company SWOT analysis; Location Specific Advantages can be linked to PEST analysis; Internalisation Specific Advantages can be linked to transaction costs and motives for vertical integration. In view of this, the OLI paradigm in business and its linkages to other frameworks can be a form through which students can begin to deploy synthesis in their work – often considered to be a higher order cognitive capability including within HE.

While FDI theory does not cover all the business economics needed for an assessment of the implications of Brexit (hence the use of ‘Spyhole’ in the title), it is a relatively practical line of enquiry, very accessible to students not majoring in economics, which nonetheless allows for differences of view and prediction to be put forward.

Russ Woodward (Business Tutor, University Centre, Grimsby Institute Group)

Tim Veal (Business Tutor, University Centre and The Academy, Grimsby, Grimsby Institute Group)


References and Resources:

BBC (2016) Net migration to UK rises to 333,000 – second highest on record. Available at:

Curtice, J. (2016) Leave campaign snatches healthy lead in the polls (but remember how they called the election). The Telegraph. Available at:

Dunning, J. (1981) International Production and the MNE. George Allen and Unwin.

FT (2017) How to teach MBA Students about Brexit – Financial Times. Available at:

KPMG (2017) Brexit: The Impact on Sectors – KPMG. Available at:

LSE/ Dhingra, S., Ottaviano, G., Sampson, T., and Van Reenan, J. (2016). The Impact of Brexit on Foreign Investment in the UK. London School of Economics. Centre for Economic Performance. Available at:

Meyer, J. and Land, R., 2003. Threshold Concepts and Troublesome Knowledge: Linkages to ways of Thinking and Practising within the Disciplines (412-424). Edinburgh: University of Edinburgh.

OXREP (2017) The Economics of Brexit: What is at Stake? Brexit Special Issue. Oxford Review of Economic Policy. Vol 33. Iss, Supp 1. Overview available at:

Simatele, M. (2010) Reconsidering the Teaching of Economics to Students on Business Programmes. The Economics Network. Available at:

TES (2016) Brexit and the EU Referendum. Prepared by Economist Foundation. Times Education Supplement. Available at:

THES (2017) Career Advice: How to Teach Brexit. Times Higher Education. Available at:

Wren-Lewis, S. (2018) Mainly Macro. Available at: