What would happen after Brexit?

Next week the United Kingdom of Great Britain and Northern Ireland votes in a referendum to decide whether to stay in the European Union or leave. The major issue with the Leave campaign is that we don’t know what would happen after Brexit.

The representatives campaigning for each side of the debate are keen to highlight the risks involved with each alternative, but would anything change on June 24th if we voted to leave the EU?

The Debate

The Remain campaign argues that the EU brings extra trade which is worth more than the cost of the UK being in the union, that we are stronger as part of a large bloc, and that leaving the EU would make European trade much more difficult.

The Leave Campaign says that the EU costs us a lot of money that could be spent elsewhere, that we don’t have enough control of laws because we are outnumbered in negotiations, and that the European Union is very different from the European Economic Community we signed up to in 1973.

There are elements to this debate that will not be known until the actual event of a British exit, as the transformation of the political and economic landscape would require some sort of agreement between Britain and the remaining members.

One thing that is for certain and that is far too often overlooked, comes from Article 50 of the Lisbon Treaty. This states that any member state leaving the EU would have at least two years from notification until the exit would take effect. This is to aid a smooth transition for both the remaining states and the newly independent one.

Trading Outside the EU

What’s the difference at the moment for a British company selling to Norway (not in the EU) versus selling to neighbouring Sweden (in the EU)?

Norway, whilst not being part of the European Union, is a member of the European Economic Area (EEA) and the European Free Trade Association (EFTA). This means that most of the benefits of the European Single Market apply to these non-EU countries. Most goods with value of over 350 Norwegian Krone (about £30) need a customs declaration, also known as a commercial invoice, which outlines what the goods are and where they are from. This usually comes in the form of a 1-2 page document with the exporter’s signature at the bottom.

In the case of Brexit, it is likely that Britain’s situation would be considered on merit and that ongoing trade regulations would be down to specific agreements made with the EU and EEA. Britain’s membership of the United Nations and NATO guarantee that political and military cooperation would continue. As a key member in the G8, Britain produces a significant amount of the world’s wealth. Whilst Britain does not export as much physical product as in the days of the EEC, the City of London is a globally-recognised financial hub.

In terms of imports, French and German car makers enjoy a very fruitful market in Britain, but there is real concern from Remain campaigners that the likes of Peugeot and Volkswagen would not be able to sell to Britain so easily. Nobody wants to jeopardise international trade. The question is, would knee-jerk fluctuations from big businesses and currency markets negatively affect the prosperity of a post-Brexit Britain? What we do know is that there are some things that cannot be forecast. Uncertainty is said to be one of the biggest risks for any economy, and this referendum is certainly full of uncertainties.

The NX Group does not officially hold a view on the EU referendum.