Board of Governors of the Federal Reserve System
01/16/2026 | Press release | Distributed by Public on 01/16/2026 13:01
Lessons from Brexit on the Effects of Trade Disintegration
January 16, 2026
Lessons from Brexit on the Effects of Trade Disintegration1
Florencia Airaudo2, Johannes Fleck3, and Kevin Vega4
Recent U.S. trade policy changes have rekindled interest in Brexit, as it represents one of the few instances in which another large advanced economy implemented substantial trade policy changes. In this note, we answer two questions: How similar were trade policy adjustments in Brexit to U.S. trade policy changes of 2025? What were the short- and long-run effects of Brexit on the U.K. economy? To answer the first question, we compare Brexit and recent U.S. policy changes along three dimensions: tariffs, non-tariff barriers (NTBs), and policy uncertainty. To answer the second question, we present stylized facts on U.K. macroeconomic performance before and after the Brexit referendum and summarize findings from the broader academic literature on the mechanisms through which Brexit affected the economy. These findings are not meant to provide predictions for the long-run effects of tariffs on the U.S. economy, but they do illustrate that it can take time for some of the effects of trade policy changes to show through.
1. UK then, US now?
Effective tariff rates
Brexit was set in motion by the referendum on June 23, 2016, in which a narrow majority voted for the U.K. to leave the EU. Through subsequent negotiations, various U.K. governments worked on designing a post-EU trade framework and uncertainty about future trading arrangements remained elevated during this process. The U.K. formally left the EU on January 31, 2020, but remained within the single market and customs union during a transition period until December 2020 and then entered a new regime under the Trade and Cooperation Agreement (TCA) in January 2021. For trade with EU members, the TCA preserved zero tariffs and quotas on goods meeting rules-of-origin requirements. However, leaving the EU customs union meant the U.K. temporarily lost access to the EU's trade agreements with third countries, increasing effective tariff rates for some imports. Yet, as illustrated in Figure 1, subsequent unilateral tariff reforms and new trade agreements reduced average tariff rates, particularly following the introduction of the U.K. Global Tariff in 2021, which unilaterally reduced most-favored nation tariff rates on many imports.
Figure 1. Effective U.K. and U.S. Tariff Rates
Note: Data for the U.S. and U.K. extends through 2026 and 2024, respectively. The effective tariff rate is the AHS-weighted average for the U.K. and the average effective tariff rate for the U.S through 2025. The annual values represent the average ETR over the preceding year. The 2026 U.S. (post-substitution) data point represents the average ETR over 2025.
Source: Haver Analytics; World Bank, WITS.
In contrast, U.S. trade policy changes in 2025 were implemented rapidly through cascading tariff increases which eventually applied to all trading partners. Starting in February, the administration announced universal tariff rate increases on some of its main trading partners (Canada, Mexico, and China). On April 2, 2025, it followed up with country-specific "reciprocal" tariff rate hikes applied to virtually all trading partners. While exemptions and bilateral agreements have since partially reversed rates, the average U.S. tariff rate remains notably higher than in recent years and far above historical norms. As shown in Figure 1, it is currently projected to settle at 14.4 percent for 2025, compared with only 2.4 percent in 2024.
Non-tariff trade barriers
Brexit also introduced new NTBs to trade between the U.K. and EU, including customs declarations, rules-of-origin documentation, and regulatory conformity checks. These requirements do not appear in tariff schedules but impose real trade costs, particularly for perishable, just-in-time, or regulated goods. Studies estimate that Brexit-related NTBs increased U.K.-EU trade costs by approximately 2-12 percent in tariff-equivalent terms, with the largest increases observed for food products (Tamberi, 2024; Du and Shepotylo, 2022; Fusacchia et al., 2022).5
In comparison, the most visible part of the U.S. trade policy changes of 2025 has been direct increases in import tariffs. At the same time, some of the trade agreements are aiming to reduce NTBs for U.S. exports. However, altering NTBs typically requires technical coordination, legal consultations, and legislative steps, making such changes take much more time to come into effect than tariff adjustments. This helps explain why negotiating and ratifying full-fledged trade agreements is usually a multi-year process, which contrasts with the rapid and unilateral implementation of the 2025 U.S. tariff measures. Notably, only a few countries-mostly in Southeast Asia-have committed to specific NTB reductions as part of recent trade agreements, while negotiations with major partners (Canada, Mexico, China, Japan, Korea, and the EU) have focused primarily on tariff changes and investment commitments.6
To summarize, Brexit did not result in a notable rise in U.K. import tariffs because many tariffs were kept constant or even reduced under the umbrella of new trade agreements. However, new NTBs increased trade costs substantially. By contrast, the U.S. implemented tariff increases on all trading partners, resulting in higher import costs. At the same time, there have been attempts to reduce NTBs through provisions in select trade agreements, aiming to reduce costs for U.S. exporters. But concrete reductions in this dimension are not yet prominent. In other words, trade costs increased for both the U.K. and the U.S. but the composition of these increases differed notably.
Trade policy uncertainty
Both Brexit and the 2025 U.S. tariff actions were associated with sharply elevated policy uncertainty. Although reform proposals had been discussed publicly for some time in both economies-through the Brexit referendum and the U.S. presidential election campaigns- the scale and scope of the eventual measures were not fully anticipated. In the U.K., the referendum result itself came as a surprise, and uncertainty evolved in stages, spanning the referendum, lengthy negotiations with the EU, the transition period, and the TCA's entry into force. As a result of this drawn-out process, uncertainty about actual policy changes lingered for a prolonged period. In contrast, following the outcome of the U.S. presidential election in November 2024, the public anticipated policy changes towards higher tariffs but was surprised by their magnitude and universality. Moreover, while uncertainty rose sharply ahead of the announcements, it remained elevated thereafter, as ongoing communications on unilateral tariff adjustments and bilateral negotiations reduced the predictability of further trade policy changes.
Figure 2 compares Economic Policy Uncertainty (EPU) indices for the U.K. and the U.S. (Baker, Bloom, and Davis, 2016). While both series reflect broader policy developments and global shocks in addition to trade policy changes, including the Covid-19 pandemic, they show clear differences in sensitivity to domestic events. In the U.K., uncertainty rose sharply in 2016 and around U.K.-EU negotiation milestones but remained largely contained domestically with limited spillovers to the U.S. index. In contrast, U.S. tariff announcements in 2025 generated visible spikes in both series; the U.S. index reached an all-time high in April 2025, with an index of 725, substantially exceeding the U.K. peak around the Brexit referendum, while the U.K. series also rose notably, reaching an index of 499, nearing referendum-era levels.
Figure 2. U.K. and U.S. Economic Policy Uncertainty Indices
Note: Data extends to November 2025. Four vertical dashed lines mark key events: "Brexit Referendum" around (June 2016), "U.S. Trade Policy Shift" (January 2018), "Brexit Transition Ends" around (December 2020), and "U.S. Trade Policy Shift" (April 2025).
Source: Economic Policy Uncertainty Indices for the U.K. and the U.S. compiled by Baker, Bloom, and Davis.
To further evaluate international spillovers, Figure 3 shows the global Trade Policy Uncertainty Index (Caldara et al., 2020). The index rose sharply in early 2025, marking its highest recorded level, surpassing the peaks associated with Brexit and the 2018 U.S. tariff increases. This pattern suggests that the 2025 U.S. policy changes were perceived as a global shock to the trade policy environment, whereas Brexit was viewed primarily as a regional event.
Figure 3. Global Trade Policy Uncertainty index
2. The Economic Effects of Brexit
We now turn to investigating the effect of Brexit on the U.K. economy, with a focus on differences between short-run and long-run effects. We first present some stylized facts and then summarize additional findings from the broader literature that shed light on the economic mechanisms.
2.1. Stylized Facts
For the short-run, we compare a set of macroeconomic indicators in the first and second halves of 2016, that is, just before and after the Brexit referendum. For the long run, we compare averages for the decade before the referendum (2005-2015) with the eight years following it (2017-2025).
This approach highlights structural shifts associated with Brexit but abstracts from the fact that other (global) shocks also affected the U.K. economy over this period. To address this limitation, we compare changes in the same set of indicators for the U.S. and a number of other advanced foreign economies (AFE), namely Canada and the euro area. These are a natural control group to assess how Brexit shaped the U.K.'s economic trajectory as they did not implement comparable trade policy changes but were exposed to the same global shocks, such as the Covid-19 pandemic.
The top panel of Figure 4 displays GDP growth (left panel), inflation (middle panel) and equity prices (right panel) in the first and second halves of 2016. While GDP expanded faster in the U.S. and the AFEs in 2016H2 than in 2016H1, the U.K. experienced a notable slowdown between those two reference periods. Yet, its GDP growth rate remained positive in the two quarters immediately after the Brexit referendum. For inflation, all three economies experienced notably higher price growth in 2016H2 than in 2016H1. The U.K.'s increase was the largest, though not unusually large relative to the AFEs.
Figure 4. The aggregate, comparative effect of Brexit
Note: AFE consists of Canada and the euro area and uses GDP weights. Quarterly GDP data extends through Q2 2025 for the U.S., and through Q3 for the U.K., Canada, and the euro area. Headline CPI data extends through September 2025 for the U.S., and through October for Canada, the euro area, and the U.K. Equity price data extends through October 2025 for all countries.
Source: Haver Analytics; FRB Staff Calculations.
Finally, while the days after the Brexit referendum saw a sharp decline in U.K. and global equity markets, these declines turned out to be short-lived, and the U.K. experienced the strongest increase in equity prices of all three economies. The rebound was likely supported by the sharp depreciation of sterling, which improved the earnings outlook for exporters and firms with substantial foreign-currency revenues (Breinlich et al., 2018). This is consistent with the notion that, after processing the surprising outcome of the referendum, markets showed some short-term optimism, particularly toward internationally exposed firms, and contemporaneous commentary raised the possibility of a more deregulated, business-oriented policy environment.
The bottom panel of Figure 4 provides evidence on the longer run changes, comparing average changes between 2005-2015 and 2017-2025. As shown by the left panel, all three economies grew more slowly in the years before Brexit, which were marked by the effect of the Great Financial Crisis starting in 2007. It also shows that the U.K. did not outperform any of the peer economies following the Brexit referendum. Instead, it fell further behind the U.S. growth rate and had about the same growth rate as the AFEs.
Inflation remained highest in the U.K. both before and after Brexit, and equity prices declined over the post-2017 period, in contrast to relatively stable or rising valuations in AFEs and the U.S. This stands in contrast to the short-term post-referendum increase in equity prices, suggesting that initial optimism gave way to more cautious market expectations as the longer-term implications of Brexit became clearer.
To illustrate in more detail how views on the economic effect of Brexit evolved, we now turn to an examination of changes in market forecasts of economic activity in the U.K. In Figure 5, we show the mean Consensus Economics projections from 2015 to 2019 for U.K. annual GDP growth at horizons ranging from the same year to 10 years ahead. For ease of exposition, we focus on the 2025 horizon, for which we have forecasts from all vintages. We find that projections immediately following the referendum (from late 2016), anticipated modest short run GDP losses and a relatively quick return to trend growth. Notably, these short run forecasts were revised slightly upward in 2017, suggesting that initial disruptions appeared limited or slow to materialize.
Figure 5. UK GDP Growth Forecast
Note: Yearly vintages are constructed from Q4 mean GDP growth forecasts at 0 year up to 6-10 year forecast horizons for the U.K.
Source: Haver Analytics; Consensus Economics.
However, subsequent vintages shifted steadily downward, both for short and long run horizons, indicating that forecasters came to view the negative effects of Brexit on economic activity as more persistent than initially expected. For instance, while the GDP growth rate in 2025 was projected at 2.3 percent in 2015, it was revised downward to 1.6 percent in 2019. This evolution in forecasts is consistent with data that became available at the time, showing that Brexit effects materialized gradually through weaker investment, slower productivity growth, and adjustments in trading relationships rather than through a sharp but short-lived immediate contraction.7
In summary, our review of macro data suggests that Brexit did not generate an immediate and severe decline in the U.K. economy. GDP growth slowed and inflation rose modestly in the short term, while equity prices recovered quickly and ended the referendum year on an optimistic note. Over time, however, outcomes softened: growth disappointed and underperformed relative to the U.S., equity prices trended downward, and forecasters lowered long-run expectations for U.K. economic capacity.
2.2. Further Evidence from the Broader Literature on Brexit Effects and Transmission Mechanisms
Several other studies provide additional insights into how Brexit effects materialized, and through which channels they accumulated over time. Although the focus of our analysis is the trade dimension, it is important to recognize that Brexit encompassed broader structural changes with far-reaching macroeconomic implications. For example, the U.K.'s withdrawal from the EU also resulted in the end of free labor movement and the introduction of a new skills-based immigration system.8 Moreover, it resulted in the exit from common EU frameworks such as the Common Agricultural Policy and Common Fisheries Policy. Moreover, the U.K. lost access to the EU's financial passporting regime, a change with important consequences for cross-border financial services.9 These non-trade policy changes are important to understand Brexit effects reported in the literature.
Timing of effects
A central finding in the literature is that Brexit effects emerged gradually. Bloom et al. (2025) estimate that by 2025 Brexit had reduced U.K. GDP by 6-8 percent, investment by 12-18 percent, employment by 3-4 percent, and productivity by 3-4 percent, magnitudes far larger than early projections. McGrattan and Waddle (2020) similarly find sizeable, long-run GDP losses in a general equilibrium framework. Complementing the descriptive evidence presented above, these estimates reinforce that Brexit effects were minor in the short run but accumulated meaningfully over time, implying that modest short run effects did not preclude larger longer-run consequences.
Uncertainty and investment
The early Brexit phase was shaped strongly by policy uncertainty. Lipińska and Orak (2020) show that heightened uncertainty lowered GDP by about 2.1 percent over the following three years, driven mainly by depressed business investment. Bloom et al. (2019) document that investment fell around 11 percent over 2016-2019 and that firm-level productivity declined 2-5 percent as management attention shifted to contingency planning. Born et al. (2019) show that these effects intensified over time: using a synthetic control, they find the output gap widened gradually, reaching 1.7-2.5 percent by end-2018, consistent with weak investment translating into capacity constraints and the temporary offset from sterling depreciation gradually fading.
Trade
Brexit trade dynamics evolved in phases. Freeman et al. (2022) find no evidence of pre-2016 front-loading effects on EU imports, consistent with the unexpected "Leave" result. However, trade data show marked stockpiling ahead of the March 2019 and January 2021 deadlines, with sharp spikes in EU imports. After the TCA took effect, Gasiorek and Tamberi (2023) find that U.K. goods exports to the EU fell sharply in January 2021 but recovered quickly, whereas imports remained persistently depressed throughout 2021. By 2024, U.K. goods exports to the EU were still 18 percent below their 2019 level in real terms, while services exports exceeded pre-Brexit levels (Ward and Webb, 2025). Adjustment on the extensive margin-firms dropping EU products-proved particularly persistent (Freeman et al. 2022), especially among smaller exporters unable to absorb fixed compliance costs.
Productivity
Several studies link weak U.K. productivity outcomes following Brexit to reduced capital formation and supply-chain reconfiguration. Bloom et al. (2025) attribute part of the productivity decline to reduced investment in physical and intangible capital, with the largest losses concentrated in manufacturing sectors integrated into complex supply chains. Firms also reconfigured their market access strategies: Breinlich et al. (2020) document a 17 percent increase in outward foreign direct investment (FDI) to EU countries as firms established subsidiaries to circumvent new barriers-investment that would otherwise have expanded U.K. capacity.10
Inflation
While Brexit did not result in a broad-based inflation surge, it generated persistent price pressures in exposed sectors. Bakker et al. (2023) find that food products with high EU import dependence experienced around 8 percentage points more cumulative inflation between December 2019 and March 2023 than they would have in the absence of Brexit. These effects were entirely driven by products facing high NTBs, especially those subject to sanitary and phytosanitary controls, while low-NTB products showed no significant price differential. This pattern underscores how regulatory frictions generate highly uneven price effects.
3. Conclusion
The Brexit referendum of 2016 and the U.S. trade reforms of 2025 represent major trade policy changes. In both cases, the initial announcements came as a surprise and were followed by increases in policy uncertainty. However, the design of policy reforms diverged: in the U.K., tariff changes were minor while NTBs rose substantially, whereas the U.S. reforms focus explicitly on increasing tariffs. Still, both resulted in notable increases in trade costs. Moreover, Brexit unfolded gradually through multi-year negotiations and phased implementation, while U.S. tariff measures were implemented rapidly with many details emerging only ex-post. Finally, Brexit was largely viewed as a regional event, whereas the 2025 U.S. trade policy changes have generated a more visible global imprint.
Market and forecast reactions to the Brexit referendum highlight how economic adjustments to trade policy shocks evolve over time. Equity markets recovered quickly after the referendum, but the U.K.'s economic performance softened over the subsequent years. Economic forecasts also changed gradually: early projections anticipated short-run disruption with limited persistence, but long run expectations were revised downward as evidence mounted of slower investment and productivity growth. Consistent with this, research suggests that these longer-run effects reflect gradual adjustments in supply chains and trade patterns due to the structural changes resulting from Brexit.
All told, the Brexit experience indicates that large trade policy shifts can influence economic outcomes gradually and manifest over long-time horizons.
References
Bakker, J. D., Datta, N., Davies, R., & De Lyon, J. (2023). Brexit and consumer food prices: 2023 update (CEP Brexit Analysis No. 18). Centre for Economic Performance, London School of Economics.
Baker, S. R., Bloom, N., & Davis, S. J. (2016). Measuring economic policy uncertainty. Quarterly Journal of Economics, 131(4), 1593-1636. https://doi.org/10.1093/qje/qjw024
Bloom, N., Bunn, P., Chen, S., Mizen, P., Smietanka, P., & Thwaites, G. (2019). The impact of Brexit on UK firms (NBER Working Paper No. 26218) (PDF). National Bureau of Economic Research.
Bloom, N., Bunn, P., Mizen, P., Smietanka, P., & Thwaites, G. (2025). The economic impact of Brexit (NBER Working Paper No. 34459 (PDF)). National Bureau of Economic Research.
Born, B., Müller, G. J., Schularick, M., & Sedláček, P. (2019). The costs of economic nationalism: Evidence from the Brexit experiment. Economic Journal, 129(623), 2722-2744. https://doi.org/10.1093/ej/uez020
Breinlich, H., Leromain, E., Novy, D., & Sampson, T. (2020). Voting with their money: Brexit and outward investment by UK firms. European Economic Review, 124, 103400. https://doi.org/10.1016/j.euroecorev.2020.103400
Breinlich, H., Leromain, E., Novy, D., Sampson, T., & Usman, A. (2018). The economic effects of Brexit: Evidence from the stock market. Fiscal Studies, 39(4), 581-623. https://doi.org/10.1111/1475-5890.12175
Caldara, D., Iacoviello, M., Molligo, P., Prestipino, A., & Raffo, A. (2020). The economic effects of trade policy uncertainty. Journal of Monetary Economics, 109, 38-59. https://www.sciencedirect.com/science/article/pii/S0304393219302004
Du, J., & Shepotylo, O. (2022). TCA, non-tariff measures and UK trade (ERC Research Paper No. 98) (PDF). Enterprise Research Centre.
Freeman, R., Manova, K., Prayer, T., & Sampson, T. (2022). Unravelling deep integration: UK trade in the wake of Brexit (CEP Discussion Paper No. 1847) (PDF). Centre for Economic Performance.
Fusacchia, I., Salvatici, L., & Winters, L. A. (2022). The consequences of the Trade and Cooperation Agreement for the UK's international trade. Oxford Review of Economic Policy, 38(1), 27-49. https://academic.oup.com/oxrep/article/38/1/27/6514752.
Gasiorek, M., & Tamberi, N. (2023). The effects of leaving the EU on the geography of UK trade. Economic Policy, Volume 38, 116, 707-764. https://academic.oup.com/economicpolicy/article/38/116/707/7146499
Lipińska, A., & Orak, M. (2020). Real Effects of Uncertainty: Evidence from Brexit (FEDS Notes). Board of Governors of the Federal Reserve System.
McGrattan, E. R., & Waddle, A. (2020). The impact of Brexit on foreign investment and production. American Economic Journal: Macroeconomics, 12(1), 76-103.
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Tamberi, N. (2024). The welfare effects of leaving the EU: A first ex-post assessment. Centre for Inclusive Trade Policy.
Ward, D., & Webb, M. (2025). Statistics on UK-EU trade: Trade data and recent trends. House of Commons Library Research Briefing, 22 April 2025.
Appendix
A: Macroeconomic indicators: Full comparison table
The Macro Effects of Brexit
| Short-term | Long-term | |||||||||||
| 2016H1 | 2016H2 | 2005-2015 | 2017-2025 | |||||||||
| UK | US | AFE | UK | US | AFE | UK | US | AFE | UK | US | AFE | |
| Inflation | 0.35 | 1.07 | 0.25 | 0.94 | 1.47 | 0.63 | 2.51 | 1.97 | 1.74 | 3.64 | 3.36 | 2.86 |
| GDP Growth | 0.62 | 0.75 | 0.29 | 0.44 | 0.97 | 0.58 | 0.33 | 0.86 | 0.25 | 0.41 | 1.41 | 0.4 |
| Unemployment Rate | 4.98 | 4.92 | 9.86 | 4.8 | 4.83 | 9.45 | 6.54 | 6.8 | 9.65 | 4.23 | 4.55 | 7.34 |
| Policy Interest Rate | 0.5 | 0.37 | -0.19 | 0.3 | 0.42 | -0.22 | 2.1 | 1.45 | 1.01 | 1.9 | 2.36 | 0.98 |
| Bond Interest Rate | 1.54 | 1.84 | 1.02 | 1.07 | 1.85 | 0.93 | 3.43 | 3.22 | 3.37 | 2.18 | 2.77 | 1.66 |
| Equity Prices | 98.42 | 97.93 | 96.45 | 109.35 | 105.8 | 104.9 | 127.53 | 118.14 | 120.91 | 108.41 | 173.75 | 120.99 |
| Exchange Rate | 94.08 | 99.4 | 101.58 | 85.82 | 101.7 | 101.53 | 87.28 | 95.53 | 91.65 | 105.17 | 100.98 | 84.27 |
Notes: AFE includes Canada and the euro area and is weighted using GDP.
Inflation refers to average 12-month headline inflation. GDP growth refers to average, quarter-over-quarter, seasonally adjusted real GDP growth.
Unemployment Rates is average monthly. Policy interest rates are central bank short-term rates. Bond Interest Rate refers to 10 year.
Equity Prices are the FTSE, S&P500 and weighted average of AFE stock market indices.
Exchange rate is the real effective exchange rate, indexed to Dec. 2015 in the short-terrm, and to Dec. 2004 and Dec. 2016 in the long-term.
1. We thank Logan Lewis and the Boards' Trade and Quantitative Studies Section for help with understanding U.S. non-tariff barriers to trade and Shaghil Ahmed for comments. Return to text
2. Economist. Federal Reserve Board of Governors. [email protected]. Return to text
3. Senior Economist. Federal Reserve Board of Governors. [email protected]. Return to text
4. Research Assistant, Federal Reserve Board of Governors. [email protected]. Return to text
5. Estimates vary by sector and method. Tamberi (2024) uses a gravity framework and finds that the TCA raised bilateral trade costs by about 1.7 percent for U.K. exports to the EU and 5.3 percent for EU exports to the U.K., which, given the TCA's zero tariffs, are best interpreted as NTB-type increases. Fusacchia et al. (2022) calibrate the TCA as adding about 8 percentage points of NTB trade costs on average for U.K.-EU goods trade (around 12 to 13 percentage points once border costs and rules of origin are included), with substantial sectoral variation, and especially large values for food. Du and Shepotylo (2022) estimate substantial ad valorem equivalents for sanitary and phytosanitary measures and technical barriers, often above 10 percent in some sectors. Return to text
6. For example, despite multiple rounds of negotiations spanning three years, the U.S. and EU ultimately failed to conclude the Transatlantic Trade and Investment Partnership (TTIP) trade agreement. While progress on reducing mutual tariff rates was made early on, different views on NTBs, in particular regarding food standards, could not be resolved and are considered one of the main reasons why the trade agreement ultimately fell through. Return to text
7. Table A in the appendix reports the numerical values of the indicators shown in Figure 4 as well as additional indicators (unemployment rate, policy interest rate, bond interest rate, and the exchange rate). Return to text
8. Using data from the Office for National Statistics (ONS), the Office for Budget Responsibility (2024), shows that the number of EU immigrants has been declining since 2015 and even turned negative in the latest years, reflecting net emigration of this group. Yet, this change was accompanied by a surge in immigrants from non-EU countries, such as India and Pakistan, which resulted in a strong increase of net inflows under the U.K's post Brexit immigration system. Return to text
9. Under the EU's financial passporting regime, firms authorized to operate in one EU or euro area member state could provide financial services across the single market without obtaining separate licenses in each country. The U.K.'s departure from this framework significantly curtailed market access for U.K.-based financial institutions. Return to text
10. Breinlich et al. (2020) use a synthetic control method to construct a no-Brexit counterfactual and show that, by March 2019, the Leave vote had led to roughly a 17% increase in the number of UK outward investment transactions in the remaining EU member states, while outward investment to non-EU OECD countries was essentially unaffected. Return to text
Please cite this note as:
Airaudo, Florencia, Johannes Fleck, and Kevin Vega (2026). "Lessons from Brexit on the Effects of Trade Disintegration," FEDS Notes. Washington: Board of Governors of the Federal Reserve System, January 16, 2026, https://doi.org/10.17016/2380-7172.3984.
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