Policy Conference 2016

Unleashing the self-employed in the new economy

April 26th 2016 | London

EU Referendum: What might UK trade look like after a “Brexit”?

Written by Jordan Marshall, IPSE Policy Advisor on 11 March 2016
EU Referendum

Whether we vote to remain or to leave, the result of the EU referendum will have serious implications for many of the UK’s 4.6 million self-employed. What will our relationship with Europe be like if we vote to leave? We could follow the path taken by other countries which are in Europe but not part of the EU, or we could create our own, entirely new model.

Those calling for Brexit argue that the UK is the world’s fifth largest economy, and so we’ll easily be able to negotiate free trade deals with the EU, the USA, China and other important trading nations.

But those in the “Remain” camp disagree. They highlight the problems with existing models, which often force the non-members to pay into the EU budget and follow EU regulations if they want to trade in the single market.

Here, we’ve provided a brief outline of the most talked about options that have been put forward as potential models for the UK to follow, to help you make the most informed decision on June 23.

1. Norwegian Model

  • Although it isn’t a member of the EU, Norway is part of the European Economic Area, which gives the country access to the single market and the goods, services, people and capital that come with it, but doesn’t make them subject to EU laws on things like agriculture, justice and home affairs.
  • It’s appealing for those who think there are economic benefits to be gained from the EU, but who are wary of ‘ever closer union’.
  • There is a downside though: Norway has to implement EU laws which are designed only to benefit EU countries – and it doesn’t have any say in how they’re written. Roughly 75% of all EU legislation has been brought in in Norway as a result.
  • If the UK were to adopt this model, we’d still have to pay a significant amount of money into the EU; Norway’s contribution is only 17% less per head than the UK’s, despite the fact that they aren’t a member. 

2. Customs Union

  • Alternatively, the UK could establish a customs union with the EU as Turkey has done. It would mean that we can trade with the EU in manufactured goods, but we’d still be exempted from EU social and employment laws – and we wouldn’t have to contribute to the EU budget.
  • However, one of the UK’s most important assets is its booming financial services industry, which needs access to the single market to thrive. A customs union alone wouldn’t allow this to happen, so the City of London could suffer.
  • Similarly to the Norwegian model, a customs union would also force the UK to comply with regulations in the EU markets we trade with, without giving us a say over their development.

3. Swiss Model

  • Unlike Norway, Switzerland chose not to join the EEA. Instead it negotiated a string of over 20 major and 100 minor bilateral agreements (they deal directly with the individual countries on issues ranging from science to air traffic to security) with the EU. In the sectors where they have agreed bilateral agreements, they’re still required to bring in EU laws.
  • People can currently move freely between Switzerland and the EU.
  • Switzerland is able to pick and choose which EU programmes it participates in. They also pay a lot less than the EEA Norwegian model, with the Swiss contributing 60% less per capita than the UK.
  • The Swiss haven’t reached an agreement covering trade in financial services – meaning Swiss financial institutions often serve the EU market through subsidiaries based in London. That’s the big drawback: if the UK were to leave, this model doesn’t give large financial institutions the same access to the single market they get in the EEA, and they may leave London for Paris.

4. WTO rules

  • If we don’t put alternative arrangements in place, our trade with the EU will be governed by the World Trade Organisation (WTO).
  • They would likely impose various new trade tariffs on the UK, which will make it less profitable to export to the EU and make it more difficult for UK service providers to operate in EU countries.  
  • Workers from EU states would no longer be free to move to the UK, but free movement of capital would probably continue, so UK and EU citizens alike could still open bank accounts, buy property and so on in each other’s countries without a heavy financial penalty.
  • In this scenario, the UK would undoubtedly experience higher tariffs to trade with the EU, but we would also have more control to set our own laws and standards.

5. Free trade deal

  • Another option is for the UK to negotiate our own Free Trade Agreements (FTAs) with countries around the world, which most Eurosceptics feel is the best course of action.
     
  • We would not have to contribute to EU budget, and would be exempt from the requirement for free movement of people. 
  • However, we still wouldn’t have full access to the single market in this situation, and deals can take many years to complete. This is particularly true for deals between the UK and the EU – as all remaining 27 states would need to be in agreement.

The list above is not exhaustive, and ultimately it’s difficult to say what the UK’s relationship with the EU would look like were we to leave.

IPSE will be providing more insight in the coming months on what the self-employed need to consider ahead of the vote. We’ll also be surveying our members to find out where they stand in the debate and what reforms, if any, matter to them the most. Watch this space!

 

Jordan Marshall, IPSE Policy Advisor