The Prime Minister has stated she doesn’t necessarily envisage that the UK will adopt an ‘off-the-shelf’ model for Brexit, and that a tailored approach will be more appropriate. She has also continually reaffirmed that ‘no deal is better than a bad deal’ meaning that if the EU is placing too heavy demands on the UK to retain unfettered access to the single market then the UK is prepared to walk away from the negotiating table and revert to WTO trading rules. However, despite making certain commitments in her Lancaster House speech in January 2017, after the general election certain options had been put back on the table that the Theresa May had previously ruled out.
The Institute of Government has conducted research into the different models for future trade and a summary of their findings are below.
Summary of the key issues involved in a no deal scenario:
Some examples of agreements that the UK government could seek to replicate are shown in the table below:
In its concluding remarks the report says "It has been suggested that the options set out here could soften the transition out of the EU for businesses currently dependent on trading with the EU."
"It is clear that the UK needs to ensure, at a minimum, that it has sufficient agreements in place as it leaves the EU to minimise regulatory checks and to streamline and minimise customs formalities, allowing data sharing and rapid transit. Other third countries that trade with the EU have these in place, even if they do not have a comprehensive free trade agreement – and none has anything like the level of supply chain integration or dependence on the EU market that the UK has. Leaving with no deal and simply trading on WTO terms with no side agreements would introduce disruption well in excess of the costs of tariffs on manufactures".
"In the short run, at least, agriculture looks to be a specific problem, catered for by neither the current models of EEA membership nor the Turkish Customs Union agreement. This suggests that the UK would need some sort of transitional deal that came as close as possible to replicating the status quo while systems were put in place, capacity built and long-term details agreed".
"But in order to decide its negotiating stance, the Government needs to fully understand the costs to business from disrupting supply chains – and the sources of those costs (rules of origin, regulatory checks, potential border delays) – and weigh them against the benefits of, for example, more regulatory flexibility or the ability to negotiate new trade deals. It needs to be realistic about the speed of adjustment – in terms of both implementation by government and adaptation by business. And it needs to publish its analysis of where the costs and benefits lie to allow an informed debate about negotiating priorities, which has been lacking since the Referendum".
You can read the full report here:Institute of Government report.pdf
It is our intention in sharing this information to help our members prepare for each of the eventualities outlined above.