What are our options if we leave the EU?

What impact will a Brexit have on businesses in Leicestershire? Corporate lawyer at Shakespeare Martineau, Roy Botterill, assesses the consequences

Regarding which way to vote, I am firmly in the ‘don’t know’ camp but had wondered what the likely trade position might be if Britain leaves the EU.

If Britain votes to leave the EU in June, we have to assume any UK government will then try to negotiate to keep strong trade links with Europe.

Ignoring all the politics, the most likely results are:

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The UK joins the European Free Trade Association (EFTA) and the European Economic Area (EEA) which will put us in a similar position to Norway, Iceland and Liechtenstein, or

The UK negotiates a “customs union” with the EU, which would put us in a similar to position to Turkey, or

The UK negotiates either a standalone free trade agreement with the EU, or a series of agreements covering individual trade sectors, similar to the way Switzerland operates

There is a fourth option, of course, which is a complete break with Europe, with the UK having no specific free trade partnership.

Let’s examine the options in more detail:

EFTA and EEA membership

This route – it is hoped – would provide domestic control over our own economy while still maintaining a strong economic link with Europe.

As an EFTA member, the UK would no longer have to recognise or adopt EU legislation in sectors such as criminal justice, agriculture and fisheries and common transport, as well as common policies relating to energy, commercial activity, foreign affairs and security.

There is a mass of existing UK “secondary legislation” which has been brought in over the years to help implement EU directives.

To sever these links would take a massive parliamentary effort.

In short, a Brexit is unlikely to make much practical difference in a five-year term as far as business regulation and business-related legislation is concerned.

One known advantage of leaving the EU is that this would substantially reduce the budgetary contribution due to Brussels.

Some business owners may hope this might lead to a fall in taxation but a more realistic option might be for the Government to re-allocate spending. Also, EFTA and EEA membership is likely to have its own budgetary impact.

Importantly, members of EFTA and EEA are still subject to EU law in a wide range of fields.

This means the vast majority of EU regulations and directives in areas such as financial services, employment rights and quality and labelling standards for goods and services would continue to affect the UK.

In particular, membership of the EEA would require the UK to copy some of the current elements of EU membership, including free movement of workers and rights to domestic social security schemes.

Lawyers also know that the EFTA court plays the same role as the current European Court – so UK courts are likely to have no greater degree of independence or sovereignty in interpreting EU law than now.

The idea that EFTA and EEA membership gives UK businesses a clean break from the EU is a misconception and the likely impact on businesses in Leicestershire would be limited.

Customs union

This would put the UK in a similar position to that held by Turkey since 1996, and so would constitute a more substantial legal break from the EU than EFTA/EEA membership would bring about.

The UK would no longer be governed by most EU law, meaning that significant legislative change could happen to a range of activities currently regulated by it.

This again, however, assumes that the Government would have the capacity and the appetite to be able to trawl through and re-write tens of thousands of pages of legislation to provide a new UK-only framework.

Even then, a customs union would still mean that EU standards in relation to goods would continue to apply to UK businesses and we would still need to remain alive to EU law and its impact on trade in goods.

EU standards would be set, as they are now, by the EU and interpreted by the EU courts. The UK would be unlikely to have any representation or influence over these issues.

Taking the EU-Turkey position as a precedent, the UK could also be required to apply the EU’s tariffs on imports from outside the EU.

The option of a customs union might, in principle, have more of an impact on businesses in Leicestershire but things would be unlikely to change immediately.

Free trade agreement(s)

This option assumes the UK would try to negotiate with the EU either a free trade agreement, or a series of free trade agreements covering individual sectors.

This would leave the UK free to make its own rules over matters such as immigration, health and so on.

However, any UK legislation that is ratified might have to acknowledge EU non-discriminatory treatment provisions with respect to incoming EU goods and services; and possibly people.

Businesses would, therefore, still have to keep on top of EU rules, since any products sold into the EU would need to comply with these.

Finally, and this is a real roll of the dice, but it is just feasible that the UK might completely ditch Europe and instead look to tie up with our North Atlantic cousins in joining the North American Free Trade Association (NAFTA).

Now, I wonder what Leicestershire businesses would make of that?

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