The PM has already said that she does not intend to remain a member of the EU’s single market. In her speech (opens in a new window), setting out her 12 key aims for Brexit negotiations, she stated, “What I am proposing cannot mean membership of the Single Market." She explained that European leaders have made it clear that membership of the single market means signing up to the "four freedoms" of movement of goods, capital, services and people – something that would "to all intents and purposes mean not leaving the EU at all."
EEA (single market only) – the Norwegian model – requires UK to remain fully compliant with EU legislation, meaning that current regulation and timelines for adoption of new legislation would remain in force, as would the free movement of people. The PM has all-but ruled this out.
EFTA (free trade agreement) – the Swiss model – a number of bilateral agreements on free trade for specific industries including much of the service sector. Free movement still applies.
Comprehensive Economic and Trade Agreement (CETA) – the Canadian model – free trade agreement for most areas notably excluding financial services.
Commentators have asked whether the UK would adopt trade deals with the EU similar to those of Switzerland, Canada or Norway. In fact, we asked our clients for our business sentiment survey and from over a thousand responses there was no clear consensus in our results.
Theresa May has said that she will seek to negotiate a ‘red, white and blue Brexit’, and we know that the government is seeking a bespoke deal.
The UK government has said that unlike previous trade negotiations, Britain's status as we leave the EU puts us in an "unprecedented" position. The government white paper (opens in a new window) on Brexit explains: "Unlike other trade negotiations, this is not about bringing two divergent systems together. It is about finding the best way for the benefit of the common systems and frameworks, that currently enable UK and EU businesses to trade with and operate in each others’ markets."
Officially, trade negotiations can't even begin until after a Brexit deal has been finalised. However, with the PM having taken recent trips to the US and Turkey, and the secretary of state for international trade – Liam Fox – visiting Canada, Hong Kong and Brazil, conversations about the future are likely to be taking place.
The US is the single biggest country that the UK exports to, so there will be an appetite to secure a trade deal with the US as soon as is practicable, but with seven of the top ten countries the UK currently exports to being EU members1, the imperative to achieve a good trade deal with our closest neighbours is significant.
CETA - the Comprehensive Economic and Trade Agreement between the EU and Canada – took around six years to negotiate and another two and a half years to be approved by the European Parliament – having been approved on 15 February 2017. However, as the Prime Minister explained in her speech on 17 January: "It makes no sense to start again from scratch when Britain and the remaining Member States have adhered to the same rules for so many years.”2
In the period of 2014-2020 there is a total of €16.4bn of planned investment in the UK through 17 regional and national programmes.
The Treasury has provided guarantees for regional investment funds that are agreed before the UK leaves the EU. The Welsh government (opens in a new window) is leading calls for replacement funding equivalent to that which the nation would have received from the EU, after Brexit.
As the UK prepares to leave the EU, it has been asked whether plans to replace the European Convention on Human Rights (ECHR) with a so-called British Bill of Rights will be revised.
The ECHR is an instrument of the Council of Europe – often confused with the EU but entirely separate. The Council of Europe pre-dates the EU having been established in 1949. It has 47 members, including Russia and its aims are to uphold democracy, the rule of law and human rights; it is from here that the ECHR originated.
With the huge bureaucratic task of leaving the EU and establishing new trading relationships around the world, it seems unlikely that revising our human rights legislation will be a priority for the government.
The government has stated that both Houses of Parliament will be given a vote on the final deal with the EU, which will also be subject to approval by the European Parliament.
There is little concrete information yet on what sort of immigration policy the government will take post-Brexit, or on the status of EU nationals in the UK and vice-versa. The PM has said, however, that "We will always want immigration, especially high-skilled immigration, we will always want immigration from Europe, and we will always welcome individual migrants as friends."
In theory, the negotiation period could last longer than two years. Article 50 states that the negotiating period can be extended beyond two years subject to the unanimous agreement of the European Council. The EU’s chief Brexit negotiator, Michel Barnier, has suggested (opens in a new window) he would like to reach an agreement on Article 50 by October 2018, giving just under six months for the EU and UK to sign-off on the agreements in their respective parliaments.
If you have any questions on how Barclays is preparing for Brexit, please speak to your relationship manager.
Loan markets have remained open for business despite market volatility.
Importers and exporters need to start thinking about how they might seize potential new opportunities after Brexit.