Life after BREXIT: What are the UK’s options outside the European Union? By Swati Dhingra and Thomas Sampson

  • It is highly uncertain what the UK’s future would look like outside the European Union
    (EU), which makes ‘Brexit’ a leap into the unknown. This report reviews the advantages
    and drawbacks of the most likely options.
  • After Brexit, the EU would continue to be the world’s largest market and the UK’s
    biggest trading partner. A key question is what would happen to the three million EU
    citizens living in the UK and the two million UK citizens living in the EU?
  • There are economic benefits from European integration, but obtaining these benefits
    comes at the political cost of giving up some sovereignty. Inside or outside the EU, this
    trade-off is inescapable.
  • One option is ‘doing a Norway’ and joining the European Economic Area. This would
    minimise the trade costs of Brexit, but it would mean paying about 83% as much into the
    EU budget as the UK currently does. It would also require keeping current EU regulations
    (without having a seat at the table when the rules are decided).
  • Another option is ‘doing a Switzerland’ and negotiating bilateral deals with the EU.
    Switzerland still faces regulation without representation and pays about 40% as much as
    the UK to be part of the single market in goods. But the Swiss have no agreement with
    the EU on free trade in services, an area where the UK is a major exporter.
  • A further option is going it alone as a member of the World Trade Organization. This
    would give the UK more sovereignty at the price of less trade and a bigger fall in income,
    even if the UK were to abolish tariffs completely.
  • Brexit would allow the UK to negotiate its own trade deals with non-EU countries. But as
    a small country, the UK would have less bargaining power than the EU. Canada’s trade
    deals with the United States show that losing this bargaining power could be costly for
    the UK.
  • To make an informed decision on the merits of leaving the EU, voters need to know more
    about what the UK government would do following Brexit.
  • This is the first in a series of briefings analysing the economic costs and benefits of Brexit
    for the UK.

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Written by By Project staff