Brexit functioned as a prolonged sequence of uncertainty that sent waves of financial volatility through European markets, according to new research from the University of Surrey. By analysing more than two decades of stock market data, researchers found that political announcements and leadership changes during the negotiations repeatedly triggered financial reactions that spread across the Union.
The study, published in the International Journal of Finance & Economics, introduces a new “Brexit intensity” measure that tracked approximately 500 political and economic events between 2000 and 2021. This index weighted each milestone based on real-time market reactions, including stock returns, exchange rate movements, and volatility measures. The team argues that Brexit was not a single economic shock but a series of milestones that consistently altered investor expectations.
“Brexit was a long series of political shocks that financial markets here in the UK and across the continent had to absorb in real time,” said Dr Vasileios Pappas, lead author and Associate Professor at the University of Surrey. “What we show is that each major announcement or political shift sent signals through European markets, spreading uncertainty far beyond the UK”.
France emerges as key volatility transmitter
The analysis revealed that larger financial markets typically transmit volatility to smaller ones, with France acting as the most persistent transmitter of financial stress across the EU throughout the Brexit period. The UK served as a major transmitter during the early stages of negotiations under Theresa May, while smaller markets — particularly Ireland, Portugal, and Spain — were among those most affected by the resulting turbulence.
The findings also suggest that the 2016 referendum significantly weakened financial integration within Europe. Following the vote, the level of volatility transmission between EU markets dropped sharply, indicating that individual markets began reacting more independently as political uncertainty intensified.
Strengthening financial stability
To map these shifts, the Surrey team combined advanced volatility modelling with their intensity index to expose how tightly connected the continent’s financial systems had become. The study suggests that understanding the pathways of these shocks is essential for anticipating future risks and maintaining regional stability.
“Financial markets are closely linked across borders,” Dr Pappas added. “When uncertainty rises in one country it rarely stays there. By understanding how these shocks travel we can better anticipate the risks and strengthen financial stability”.
