DIY Investor Magazine
/
March 2016
9
If the result of the referendum is that the UK should
leave, then under Article 50 of the EU Treaty, there
will be a two year negotiating period. It’s at this point
that we will definitely need a Plan B (plus, like in any
divorce, a very good lawyer!).
What therefore might the possibilities be for the UK
outside the EU? Let us consider what I see to be three
of the most obvious:
1. Join the European Economic Area (EEA):
the EEA comprises the 28 EU member nations plus
Norway, Iceland and Liechtenstein. The EEA
agreement with the EU says that those three
countries, in return for benefiting from full access
to the Single Market, should adopt all EU
legislation governing its operation. These include
the four freedoms covering the free movement
of goods, services, capital and people; adopting
competition law and state aid rules; enforcing
equal rights and obligations within the Single
Market for citizens and economic operators; and
cooperating in such areas as research &
development, education, the environment etc.
Areas specifically excluded from the agreement
are agriculture & fisheries, foreign & security policy,
justice & home affairs and, of course, monetary
union. Under this structure the EEA countries have
many of the same obligations and responsibilities
as if they were EU states, but they have absolutely
no political representation at the EU, nor do they
have any voting rights. The three EEA countries
also still contribute to the EU budget: Norway
contributes €600 million a year for example. Using
the size of Norway’s economy as a basis, the UK
contribution would be an estimated €4 billion a year
if we signed up to the same deal.
2. Join the European Free Trade Association (EFTA):
EFTA includes all the EEA nations plus Switzerland
also has access to the Single Market,
but does so via an array of individually negotiated
bi-lateral agreements with the EU covering all
aspects of the governance of that market.
Switzerland also makes a contribution to the EU
budget. The UK was a founder member of EFTA
until 1973 when we left to join the Common Market,
the fore-runner of today’s EU.
It is no secret that the EU finds many aspects of the
Swiss arrangement cumbersome, nevertheless it is
one of the potential alternatives for the UK.
3. Leave Entirely:
If neither of the above is possible or palatable, the
UK could sever all current formal ties with the EU
and the Single Market. That would then require us
to negotiate new bi-lateral agreements with all our
trading partners (including the 27 remaining EU
nations) in order to protect our ability to trade
openly, fairly and competitively without fear of
barriers and tariffs.
Such a process would be time-consuming and not
without risk. An obvious area of competitive
challenge would be to the City of London. Our
Continental neighbours, particularly in Frankfurt,
harbour long held jealousies of London’s
pre-eminent position as a world financial centre
They would dearly love to benefit from an
Increased share of the substantial capital flows in
The foreign exchange, bond and equity markets
which currently channel through London.
Lastly, in the event of a decision to leave we must not
exclude the possibility of a second referendum! Just
ask the Danes, Dutch, Irish and French when they
inconveniently delivered the ‘wrong’ verdict in their own
EU referenda at various times in the past 25 years: they
were told to go away, reconsider and vote again! Never
underestimate the will of the European elite and pro-
European governments to keep its project on course
(not least while there are very real tensions between so
many member states in trying to deal with the migrant
crisis).
