Publication

Brexit and Digital Technology Adoption of UK SMEs

Published: 25 July 2023

ERC Research paper 106

Associated Themes

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This paper examines the impact of the Brexit referendum on digital technology adoption by small and medium-sized enterprises in the UK from 2013-2019. Combining existing survey measures from the Longitudinal Small Business Survey with novel data on digital technology adoption from firms’ own websites, we provide detailed and timely measurements to gain deeper insights into SMEs’ reactions to a major policy shock. Leveraging the Brexit referendum as a trade policy uncertainty shock, we employ a difference-in-differences approach to investigate the response of SMEs. We find that SMEs adjust to this shock by scaling back their adoption of e-commerce-related technologies, along with other digital technologies. These effects cut across multiple sectors, extending beyond those traditionally associated with the trade of goods to also include service sectors. Overall, these findings provide novel insights into the strategies SMEs adopt in response to significant policy-led disruptions, highlighting their decision to significantly reduce the use of digital technologies. This charge could potentially influence their long-term productivity levels, suggesting an important area for further investigation and policy focus.

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