The negative impact of disintegration on trade: The case of Brexit

Using firm-level export and import transactions and by applying an event study methodology, we quantify the impact of the UK’s withdrawal from the EU’s single market and customs union on Spain–UK trade flows. We find that Spanish exports and imports to the UK decreased by 24% and 27%, respectively, compared to the period before the Brexit referendum. The probability of Spanish exporters and importers starting a trade relationship with the UK decreased and the probability of ending one increased. Products subject to sanitary and phytosanitary measures, stringent rules of origin, and whose technical standards had not been harmonized before disintegration experienced a stronger decline in trade flows. Large firms faced a more severe decrease in exports than small ones after disintegration.