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This paper studies consequences of the large exchange rate depreciation occurring when the UK electorate unexpectedly voted to leave the European Union. Sterling plummeted, recording the biggest one-day depreciation of any of the world's four major currencies since Bretton Woods. The prospect of Brexit happening generated sizable differences in how much sterling depreciated against different currencies. Coupled with pre-referendum cross-country trade patterns, this generated variations in exchange rates facing businesses in different industries. The paper offers evidence of a cost shock from the prices of intermediate imports rising by more in higher depreciation industries, but with no revenue offset from exports. Workers were impacted by these increased cost pressures, not in terms of job loss but through relative real wage declines in higher depreciation, larger cost shock industries. This resulted in an aggregate fall in real wage growth of 3 to 3.6% cumulatively over the three years after the referendum.

Chancellor Jeremy Hunt pledged that measures in the budget would help break down barriers that stop people working. One issue is how to ensure we have the skills the economy needs. The UK has faced – and is facing – a change in the nature of work. Nye Cominetti, Rui Costa, Andrew Eyles, Kathleen Henehan and Sandra McNally present an analysis of how the skills needed in the labour market have changed over the past decades and how well placed our system of training and particularly on-the-job training is to help us adapt to these changes.

Fears about robots taking people’s jobs are overplayed, say Rui Costa and Yuanhang Yu. Their research shows the real fear to overcome should be Britain’s lack of productivity-enhancing robots, software, artificial intelligence and other technologies.

Minimum wage increases have driven down the incidence of low hourly pay, but there has been much less progress elsewhere for low earners. Low pay is widespread among the self-employed, who do not benefit from the minimum wage and whose numbers have increased over the past 20 years. And there are several forms of work insecurity making life difficult for low-paid workers but would be considered totally unacceptable for higher paid workers to experience. Nye Cominetti, Rui Costa, Nikhil Datta and Felicia Odamtten write that a policy agenda for low-paid workers in the 2020s should seek to address these problems.

This paper studies consequences of the very large exchange rate depreciation occurring in June 2016 due to the UK electorate unexpectedly voting to leave the European Union. As news of a leave vote came in, the value of sterling plummeted, recording the biggest one day depreciation of any of the world’s four major currencies since the collapse of Bretton Woods. The prospect of Brexit really happening generated sizable differences in how much sterling depreciated against different currencies. Coupled with pre-referendum cross-country trade patterns, this generated variations in exchange rate depreciations facing businesses in different industries. The paper first considers revenue and cost channels operating through trade price responses, offering evidence of a cost shock from the price of intermediate imports rising by more in higher depreciation industries, but with no revenue offset from exports. Workers were impacted by the increased cost pressures facing businesses, not in terms of job loss but through relative real wage declines and stagnation for workers employed in industries facing larger depreciations.

This paper presents new evidence on international trade and worker outcomes. It examines a big world event that produced an unprecedentedly large shock to the UK exchange rate. In the 24 hours in June 2016 during which the UK electorate unexpectedly voted to leave the European Union, the value of sterling plummeted. It recorded the biggest depreciation that has occurred in any of the world’s four major currencies since the collapse of Bretton Woods. Exploiting this variation, the paper studies the impact of trade on wages and worker training. Wages and training fell for workers employed in sectors where the intermediate import price rose by more as a consequence of the sterling depreciation. Calibrating the estimated wage elasticity with respect to intermediate import prices to theory uncovers evidence of a production complementarity between workers and intermediate imports. This provides new direct evidence that, in the modern world of global value chains, it is changes in the cost of intermediate imports that act as a driver of the impact of globalization on worker welfare. The episode studied and the findings add to widely expressed, growing concerns about poor productivity performance relating to skills and to patterns of real wage stagnation that are plaguing contemporary labour markets.