Study: Brexit may impact global value chains
According to a study conducted by the Research Institute of the Finnish Economy (ETLA), up to one third of Finland's value-added exports to the UK pass through third countries. Finnish companies would also be affected by changes in global value chains.
The impacts of the UK's exit from the European Union may turn out to be wider than expected, even though British exports to Finland have been on the decline. These findings are based on Etla's recent study, Brexit and indirect impact routes through global value chains. The study was funded by the Ministry for Foreign Affairs.
The effects of Brexit will be reflected not only in bilateral trade flows but also in trade conducted through third countries and, ultimately, in the business activities of Finnish companies involved in global value chains. Changes in value chains may be unpredictable.
The study provides new information about value chains between Finland and the United Kingdom. The authors' analysis, which provides more detailed information than can be gathered from traditional trade statistics, reveals that as much as a third of Finland's value-added exports to the UK pass through third countries. The most important trade routes go through Germany, the Netherlands and Sweden.
Additionally, approximately one fifth of Finland's value-added trade passes through the UK on the way to a destination elsewhere in the world. The most important destination is the United States, but a substantial proportion of value added returns to EU countries such as Germany and France.
Calculated on the basis of value-added trade, the UK is still an important export country for Finland, although in the past 15 years its importance has diminished more for Finland than for the EU on average.