Understanding Brexit

How do non-members interact with the European Union?

During the debate about what kind of relationship the UK wants with Europe, many references have been made to existing models of economic co-operation between the EU and non-member states.

The UK Government must now decide on what economic relationship it will seek to replace our current EU membership, with the Prime Minister indicating a preference for a “bespoke deal”.

Here is a summary of how other non-member states interact with the EU, and how it would look if the UK replicated these relationships.

EEA Membership – Norway

UK joins the European Economic Area (EEA). We participate fully in the Single Market but must adhere to EU standards and regulations over which it will have no say. Contributions to the EU budget will continue. Norway is currently paying more per head for membership of the EEA than the UK does as an EU.

Bilateral Accords – Switzerland

The UK’s relationship would be based upon a series of bilateral agreements negotiated on a case by case basis. Switzerland only participates in specific parts of the Single Market. There is free trade in goods but they do not have Passporting rights. The UK would need to pay for this, complying with regulations and accept the free movement of people.

Customs Union – Turkey

Internal tariff barriers would be removed. The UK would adopt EU standards and regulations without influence over them. No financial contributions would be made and the UK would be free to impose immigration controls. However the UK would be required to implement EU external tariffs, without influence or guaranteed access to third country markets.

Free Trade Agreements – Canada

A series of Free Trade Agreements (FTA) would dictate our relationship with the EU. Tariff barriers would be unlikely to apply but the EU has the power to impose other restrictions. While this option provides the opportunity to implement immigration controls, there are question marks around the time it would take to implement.

WTO Membership – United States

The UK can negotiate its own deals and set its own tariffs on imports. The UK would face ‘most favoured nation’ tariffs when trading with the EU if no FTA is in place. This option guarantees the most independence on regulations and immigration and doesn’t require paying into the EU budget but barrier-free trade with the EU is sacrificed.

All of the above examples represent a departure from the European Union with each one presenting different challenges and opportunities. The Brexit choice facing the UK is more complicated than simply ‘hard’ or ‘soft’.

Given we don’t know yet what our future relationship with the EU looks like, businesses must plan for all eventualities. Watch our video about beginning our departure from the EU and three things businesses can do to prepare now for Brexit.

Read our guidance on Brexit and explore how we can help

Trade: rethinking cross border activity

Exploring potential changes to trade and supply chains

Talent: shaping your future workforce

Retaining and recruiting the skills you need through Brexit

Finance and operations: adapting processes and systems

Exploring the key issues around finance and business infrastructure