Policy analysis from the Centre for Economic Performance
CEP BREXIT Analysis
Life after Brexit : What are the UK’s options outside the European Union?
Swati Dhingra and Thomas Sampson
Paper No' CEPBREXIT01:
Press Release - Friday 12th February 2016
Life after BREXIT: New report on the UK's options outside the EU
First in a new series of #CEPbrexit policy briefings from the Centre for Economic Performance
To make an informed decision on the merits of leaving the European Union (EU), UK voters
need to know more about what the government would do following Brexit. Just as the parties
put forward policy manifestos in the run-up to an election, they should publish their plans for
a post-Brexit world before the referendum.
That is among the conclusions of a new report from the Centre for Economic Performance
(CEP), the first in a series of briefings analysing the economic costs and benefits of Brexit for
Authors Swati Dhingra and Thomas Sampson note that it is highly uncertain what the UK's
future would look like outside the EU, which makes 'Brexit' a leap into the unknown. The CEP
researchers review the advantages and drawbacks of the most likely options. Among their
- 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
- One option is 'doing a Norway' and joining the European Economic Area (EEA). 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 (WTO).
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
- A vote in favour of Brexit would fire the starting gun on a two-year renegotiation of the
UK's place in Europe and the world. If the UK opts to cut ties with the rest of Europe, this
renegotiation could fundamentally change the political, economic and legal foundations of
UK life that have built up since the country joined the EU in 1973. Alternatively, if the UK
chooses to remain part of the EEA, the economic and legal changes would be much smaller.
- During the renegotiation, the UK would face an unavoidable trade-off between economic
benefits and political sovereignty. The UK benefits from closer economic integration with
the EU, but the price for this integration is allowing the EU control over some areas of
policy. Leaving the EU will not free the UK from this fundamental trade-off.
Authors Swati Dhingra and Thomas Sampson conclude:
"At present, there is no consensus within the government or the public over what should
follow Brexit. This reflects the fact that all of the alternatives to EU membership have
their own drawbacks and would impose costs on the UK economy."
"The alternative scenarios embody very different visions of the UK's future place in the
world. The country's voters have the right to know what they are choosing between
when they enter the polling booth."
For further information, contact:
Swati Dhingra on +44 (0)20 7955 7804, Email: firstname.lastname@example.org
Thomas Sampson on +44 (0)20 7955 7408, Email: email@example.com
Helen Durrant on +44 (0)20 7955 7395; Email: firstname.lastname@example.org