Brexit: Potential outcomes in the event of a vote to leave the EU

United Kingdom

This article was produced by Nabarro LLP, which joined CMS on 1 May 2017.

Summary and Implications

Post-Exit Models

  • EEA + EFTA membership:
    Access to European Economic Area and European Free Trade Association. This would allow the UK to retain access to the internal market and EU businesses to have access to the UK. The UK would have to contribute to the EU budget, maintain and adopt EU laws in order to take advantage of the internal market and would have to continue to permit free movement of persons, freedom to provide services and freedom of establishment from other EEA states. The UK would participate formally in EU legislative processes. It would not participate in the EU common agricultural and fisheries policies, the common transport and energy policies, or in the common commercial policies. Neither would the UK be part of the EU's common foreign and security policies.
  • Bilateral agreements + EFTA:  
    Sector by sector treaties with the EU and free trade agreement with EFTA countries. Switzerland currently has over 120 bilateral agreements with the EU. UK would not have full access to the internal market as access given on a case by case basis. UK exports to, and investments in, the EU would have to comply with EU laws. The UK would not otherwise be bound to transpose EU internal market legislation into UK law and would have freedom to conclude trade agreements with third countries.
  • Customs Union:
    Turkey's customs union is limited to trade in industrial products and certain agricultural products and does not apply to services. A customs union for goods would mean goods can be exported to the EU without the need to comply with customs restrictions or tariffs. UK would not be obliged to contribute to EU budget and would have freedom to regulate its own financial services sector, but would have to comply with significant portions of EU trade policy and would lose its current right to provide financial and professional services of equal terms with EU members unless it could negotiate preferential access to the internal services market.  
  • UK-EU FTAs:  
    UK could negotiate its own Free Trade Association with the EU. Similar to Swiss model but involving a single comprehensive agreement with EU rather than multiple agreements on a sector-by-sector basis. This might be able to provide greater continuity of the internal market, e.g. in financial services, than the options above. In principle, the UK would not be obliged to contribute to the EU budget or participate in the EU common agricultural, fisheries and commercial policies. It would not have the right to influence the rules in the internal market and its export to the EU would have to comply with all relevant EU technical standards. The UK would have the freedom to regulate its own financial services sector.
  • WTO (World Trade Organisation):
    The purest form of the exit scenario this does not involved independently negotiated agreements with EU or individual EU states. The UK would have control over its trade policy and border within existing WTO rules, would not be obliged to contribute to the EU budget, but would lose all its influence in EU legislation. All UK exports to the EU would be subject to EU technical standards and import tariffs and/or restrictions to the extent permitted under the WTO rules.

 For more information on these models, please contact Alasdair Steele.