What are the ‘other’ Brexit options?

The House of Commons rejected the Prime Minister’s EU Withdrawal Agreement (WA) on January 15. Following this, the EU’s chief Brexit negotiator Michel Barnier indicated that, while ratification of the WA remained necessary, if the UK chose “to change its red lines, and to be more ambitious and go beyond a simple free trade deal in our future relationship, then the EU would be ready to immediately support this evolution and respond favourably.”

This Insight will look at potential options for the UK in negotiating its future relationship with the EU.

Ways forward

Amendments tabled by MPs to the Government’s motion on how to proceed with the Brexit process (to be debated on the 29 January), have sought to give Parliament time to debate various options on how to move forward. A report by the Commons Committee on Exiting the EU, proposes that a series of indicative votes should be held on options for the way forward.  

In the Brexit negotiations to date, the EU’s offer on the future UK-EU relationship has been presented as a binary choice. Either a conventional free trade agreement, similar to that recently negotiated between the EU and Canada (CETA), or a Norway-style relationship with the EU whereby the UK remains a part of the EU Single Market (possibly as a member of the European Economic Area (EEA) bringing together the EU, Norway, Iceland and Lichtenstein).

Neither of these options on their own would prevent a hard border on the island of Ireland (a priority for both the UK and the EU), as they involve the UK no longer being part of a Customs Union with the EU and the border between Northern Ireland and Ireland therefore becoming part of the UK-EU customs border.

The Canada-style option

The Canada-style option would also mean checks on goods crossing the border between Northern Ireland and Ireland, to ensure compliance with EU regulations. The EU previously proposed that this could be resolved by separate arrangements for Northern Ireland, whereby it would remain in a common regulatory area for goods and customs with the rest of the EU. This separate backstop arrangement for Northern Ireland was deemed unacceptable by both the Government and the Democratic Unionist Party. The Government eventually agreed a Withdrawal Agreement with the EU containing a backstop that will keep all of the UK in a single customs union with the EU, if alternative arrangements preventing a hard border in Ireland are not agreed.

Norway-plus

The EU has also indicated that it would consider a Norway-plus option, whereby the UK joins the EEA and also forms a new customs union with the EU, thereby eliminating the need for both regulatory and customs checks on the Northern Ireland-Ireland border. This option is supported by a cross-party group of MPs and has also been backed by the Scottish and Welsh First Ministers.

The Norway-style EEA option on its own crosses a number of the ‘red lines’ set out by the Government, including continuing application of EU Single Market rules (while no longer having a decision-making role in their formulation), free movement of people and sizeable financial contributions. Norway-plus crosses another red line as a Customs Union with the EU (entailing a common set of tariffs with third countries) would prevent the Government from pursuing its objective of an independent trade policy for the UK. 

The table below summarises Government, Opposition and EU views on the various options discussed.

Norway Plus The EEA Switzerland-style Bespoke Relationship Permanent Customs Union (+ FTA) CETA No Deal
Government Views Does not end free movement of persons or CJEU jurisdiction or financial contributions. Precludes independent trade policy. Does not end free movement of persons or CJEU jurisdiction or financial contributions. The government desires a bespoke ‘future relationship’ but not with free movement of persons. Permanent CU precludes independent trade policy. Economically undesirable and does not tackle Irish border issue. Economically undesirable, worst case scenario for Irish border, but default if no deal by 29 March 2019.
Opposition/
non-Government Views
Advocated by a cross-party group of MPs. The Labour Position is “no”, but some MPs are sympathetic to the EEA model. Labour advocates a strong relationship with the single market underpinned by shared institutions and obligations Official Labour position, but not endorsed by all other opposition/rebel MPs. Some non-government MPs advocate a Canada-style FTA as the desirable end state. Some MPs advocate a hard exit and trading on WTO deals.
EU Views No obvious conflict with EU red lines. No conflict with EU red lines for GB but would require customs element of Northern Ireland backstop or alternative arrangements. No desire to replicate Switzerland model. EU willing to discuss Customs Union but would require regulatory elements of Northern Ireland Backstop or alternative arrangements No obvious conflict with EU red lines if applied to GB only. But would require separate Northern Ireland backstop or alternative arrangements. Economically undesirable, worst case scenario for Irish border, but default if no deal by 29 March 2019.
Green: majority approval | Amber: unclear if majority of EU/government/opposition votes in favour | Red: no majority approval | Grey: support would be conditional

What the Opposition has said

The Labour Party has stated its support for a “new comprehensive UK-EU customs union”. But it says that this would require the UK to have “a say” in future EU deals, rather than being a passive recipient of decisions elsewhere. The EU already has a separate customs union with Turkey, but Turkey does not have a say in the EU’s trade deals and is obliged to follow the EU’s agreed trade terms for imports from other countries without any guarantee that these countries will reciprocate. The EU has indicated it would be willing to consider an EU-UK customs union, but trade experts have suggested the EU would be unlikely to give the UK a say in its trade negotiations. 

The Labour party has also advocated a “strong Single Market” relationship. The only non-EEA country that participates in the Single Market is Switzerland. It has a bespoke deal based on more than a hundred agreements with the EU, covering commitments to follow Single Market rules including the free movement of people.

However, the EU is negotiating with Switzerland to establish more institutional control over this relationship and is unlikely to want to replicate it with another country.

A ‘no-deal’ Brexit

If a withdrawal agreement does not come into force by 29 March 2019, the UK will leave the EU without an agreement, unless Article 50 is revoked or extended. A no-deal Brexit will lead to new barriers to trade with the EU, and is predicted by the Government and others to result in significant disruption, at least in the short term, and have a negative economic impact in the long term. But it is also viewed as providing for a clean break from the EU.

Economic impact

The Government’s long-term economic analysis of exiting the EU, released in November 2018, showed that compared to the level of projected GDP if the UK stayed in the EU, it would be around 1.4% lower in 15 years if the UK joined the EEA, 4.9% lower under a conventional trade agreement, and 7.6% lower in a no-deal scenario (reverting to WTO rules). These projections are all based on there being no UK-EU customs union, replication of EU international trade agreements with third countries that the UK is currently party to and the successful negotiation of trade agreements with the USA, China and other leading economies.

Further reading

Stefano Fella is a senior researcher in international affairs and defence at the House of Commons Library, specialising in Brexit.

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