The British voters decided to exit the EU in the referendum in 2016. This is the first case of leaving the EU by one of the Member State since the beginning of the Europe integration. Therefore, Brexit started providing uncertainties about the future of Europe. The effects of the economic disintegration for Britain depend on the new deal between the UK and the EU. There are two main scenarios: soft and hard Brexit. Optimistically, the UK remains in the Single Market. Pessimistically, the UK has to trade on WTO terms. Regardless of the scenarios, Brexit will lead to welfare losses for the UK due to rising trade costs between the UK and EU.
- Firm heterogeneity