Britain will have two years to negotiate its preferred relationship with the EU after triggering article 50, the formal mechanism for leaving. Civil servants and ministers are currently working on the basis of three broad scenarios for Brexit with differing levels of access to the single market and acceptance of free movement.
1. Brexit-lite (Norway, Iceland, Lichtenstein model)
Many pro-EU campaigners are hoping the UK may be able to get away with staying part of the European Economic Area. This would mean the UK still had access to the single market, with no tariffs on most goods (except much of agriculture and fisheries). Essentially, it would pay into the EU for this privilege and abide by many EU trade laws, but without participation in Brussels.
However, the catch is that the EU would almost certainly demand a continuation of free movement, which is unacceptable to many of those who campaigned and voted for Brexit. It is the model thought to be favoured by the Treasury, which is concerned about the economic impact of leaving the single market, but not contemplated by a number of other ministers who believe it is not tenable to maintain current border arrangements with the EU.
2. Customised Brexit (Switzerland, Turkey or Canada models)
This appears to be the scenario most favoured by Downing Street, as Theresa May has said she wants a bespoke relationship with the EU for the UK, rather than the inflexibility of an off-the-shelf relationship. While some EU countries have cautioned the UK it cannot expect an “a la carte” approach of picking and choosing what it wants from Brussels, others – such as Germany – have sounded more open to creating a special new relationship. In this situation, divorce from the EU would probably be relatively amicable and require a negotiated free trade agreement.
For example, Canada’s deal with the EU, which took years to agree, offers tariff-free access for most goods, but not a number of agricultural products and not on car exports for seven years. Withdrawing from the official single market would allow Britain to end the current free movement arrangements for EU citizens. However, those rights would probably end up becoming a key plank of trade negotiations, with issues such as EU citizens’ access to benefits, healthcare and the right to move to the UK for work all up for discussion.
3. Full Brexit (Russia or Brazil model)
If the UK falls out with the EU, it may end up defaulting to trade relations on World Trade Organisation terms. This would only happen in the event of a messy parting in which the two sides cannot agree terms or an extension of negotiations within two years of triggering article 50.
The UK would have the flexibility to impose tariffs on the EU and the EU would be able to do so back to the UK, which could raise prices of consumer goods. Britain would also be able to comprehensively end free movement of EU citizens, and would have to make decisions about the terms of their right to remain in the UK.