What will Brexit look like?

Written on 24 Jun 2016

The nature of any post-Brexit relationship between the UK and the EU is unknown

Following formal notice under Article 50 of the UK’s intention to leave, there will be a two year period before the withdrawal becomes effective.  The UK will be looking to agree the terms of its new relationship with the EU within that two year window – although there is an option to extend the negotiation period. Those negotiations would be intensive and detailed, and so it is not possible to know what the relationship between the UK and the EU would look like in the event of a Brexit. 

For more information on the process and key legal implications of Brexit see here.

What are the exit “options”?

The UK does not have the option of picking an “off-the-shelf” solution.  Rather,  the UK will be seeking to negotiate its own relationship with the EU. However, existing models developed over time by non-EU countries could be used as a basis for the UK model, either on their own or in conjunction with other models. We summarise the principal options for exit in the table below. 

Principal Brexit options

Option Existing examples  Compliance: what European laws would apply businesses operating in the UK? Trade: what mechanism, duties and barriers might apply to trade flow between the UK, the EU and international countries?
Become a member of European Economic Area Norway, Iceland and Liechtenstein Much of EU law concerning employment (such as the Working Time Regulations), the environment and competition (amongst others) would continue to apply to businesses operating in the UK.
In the main, future laws enacted by the EU on these issues would also apply in the UK.
UK businesses would have access to the single market.

It is unlikely that the UK would automatically benefit from the EU’s free trade agreements with non-EU trade areas.

(Re)join the European Free Trade Agreement (EFTA) and enter into a series of bi-lateral agreements Switzerland Some EU employment law relating to free movement of persons would continue to apply to UK business but, in the main, EU law not already enacted as primary legislation in the UK would fall away.
Where EU law falls away, the UK would have to decide whether (or not) to implement these laws by passing new (or amending existing) primary UK legislation.
The UK would be free to conclude trade agreements with other EFTA member states, either independently or jointly through EFTA. However, each agreement would need to be negotiated separately.

Conceivably, bilateral agreements might only cover specific sectors, meaning that the UK would not have full access to the single market. In those sectors not covered by bilateral agreements, the UK would not be required to comply with EU law except in relation to exports and investments into the EU.

The UK would not benefit from the EU’s free trade agreements with extra-EU trade areas.

Enter into a customs union with the EU Turkey  EU law not already enacted as primary legislation in the UK would fall away. The UK would have to decide whether to implement these laws by passing new, or amending existing, primary UK legislation.
The UK may be required to implement certain EU legislation as a condition of the customs agreement.

UK businesses could export goods to EU Member States without tariffs or customs duties. Such a right might be conditional on the UK agreeing that businesses would comply with certain EU regulations.

The UK could be required to implement tariffs with extra-EU countries. 

The arrangement could be limited to goods (i.e. not extend to services) and certain industries, such as financial services, might be excluded.

Free Trade Agreement South Korea and Mexico EU law not already enacted as primary legislation in the UK would fall away. The UK would have to decide whether to implement these laws by passing new, or amending existing, primary UK legislation. Individual negotiation of trade terms would be required either with each EU Member State or with the EU as a whole.
  
The UK would not benefit from the EU’s free trade agreements with extra-EU trade areas.
World Trade Organisation-only relationship China and US EU law not already enacted as primary legislation in the UK would fall away. The UK would have to decide whether to implement these laws by passing new, or amending existing, primary UK legislation. The UK would rely on its membership of the WTO as a basis for trade with the EU – it would not have separately negotiated agreements with the EU or EU Member States.

In the absence of access to the single market or a customs union, UK exports to the EU would attract the standard EU customs tariff.

The UK would no longer benefit from the free trade agreements between the EU and other trading nations.

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