Brexit was fuelled by increasing voter distrust of politicians
The Economist Intelligence Unit's (EIU) annual report on global politics also downgraded the status of the US from a full democracy to a flawed one.
The Democracy Index found that the election of Donald Trump to the White House happened because popular confidence in government had slipped to historic lows in America.
The report ranks systems of government across the world on a points basis covering areas like political participation and civil liberties.
Norway topped the list, with the UK ranking 16th out of the 19 countries branded full democracies, while North Korea came bottom of the table of 167 nations.
Of the 57 countries ranked as "flawed democracies", 17 are in the EU, while 51 countries are branded authoritarian, and 40 listed as hybrid-regimes.
Report editor Joan Hoey said Brexit and the surprise Trump victory were linked as they both expressed a desire for major change in the status quo.
Brexit and Trump victory were linked as they both expressed a desire for major change in status quo
She said: "The backlash was the culmination of a longstanding trend of deterioration in the quality of democracy in the US and Europe, which is manifested in declining trust, falling popular participation and the erosion of civil liberties.
"The US has been downgraded because of a further erosion of trust in government and elected officials. This is not a consequence of Donald Trump. On the contrary, the election of Mr Trump as US president was in large part a consequence of the longstanding problems of democracy in the US."
Brexit had re-engaged voters with the democratic process
May's Brexit speech: Europe reacts
Tue, January 17, 2017
Politicians and celebrities tweet their reaction as Theresa May unveils her 12 point plan for Britain leaving the EU.
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The British Prime Minister Delivers Her Brexit Speech
The report said Brexit had re-engaged voters with the democratic process, stating:
"A 21st-century record turnout of 72.2 per cent in the June 2016 Brexit referendum, compared with average turnouts of 63 per cent in the four general elections since 2001, revealed a rise in popular engagement and participation that boosted the UK's score in 2016.
"The UK is in 16th place in the global ranking. The long-term trend of declining political participation and growing cynicism about politics in the UK seemed to have been reversed. There has also been a significant increase in membership of political parties over the past year."
The EIU found that "forgotten voters" had found a voice in 2016 which resulted in the Brexit result and Trump triumph.
"The parallels between the June 2016 Brexit vote and the outcome of the November 8th US election are manifold. In both cases, the electorate defied the political establishment. Both votes represented a rebellion from below against out-of-touch elites.
Both were the culmination of a long-term trend of declining popular trust in government institutions, political parties and politicians.
"They showed that society's marginalised and forgotten voters, often working-class and blue-collar, do not share the same values as the dominant political elite and are demanding a voice of their own – and if the mainstream parties will not provide it, they will look elsewhere," the report states.
Ireland is ranked in joint sixth place with Canada in the survey, while America's reclassification as a flawed democracy means it scores lower than Uruguay or Mauritius.
Democracies, in various forms, account for 76 of the countries surveyed, which are home to 44.8 per cent of the world's population.