Deglobalisation in disguise? Brexit barriers and trade in services

Deglobalisation policies promote the vision that pulling back from economic integration can help correct international imbalances and reposition national economies for renewed prosperity. A core vision of Brexit was to transform the UK to a new Global Britain - a sovereign trading nation free from EU constraints, and capable of reinvigourating its historical comparative advantage in the world economy. Central to this was the idea of "taking back control" of regulations, particularly in high-value-added services where EU rules were seen as limiting the UK's longstanding global competitiveness. We develop granular and comprehensive measures of UK's departure from regulatory alignment with the EU, and find that they have introduced significant new bilateral trading frictions that have not been offset by increased competitiveness in markets beyond the EU. UK exports to the EU in services that have got these new Brexit barriers have declined by 16 percent relative to other bilateral trade flows. Overall, UK services exports are estimated to be 4 to 5 percent lower, indicating that five years on, Brexit has fallen short of delivering its vision of Global Britain.