What would a 'transitional' Brexit deal for the UK be?

Such a deal is widely presumed to involve Britain leaving the EU, as planned, in 2019 but immediately entering a close trading relationship with the rest of the bloc as part of the European Economic Area

Ben Chu
Economics Editor
Monday 21 November 2016 18:05
Transitional benefits?
Transitional benefits?

Theresa May has reportedly raised the prospect of the UK entering a transitional Brexit arrangement with the rest of the European Union in 2019 rather than going through a total rupture.

She told the CBI today that UK businesses wanted to avoid a “cliff edge” in two years’ time.

A Downing Street spokesman later said that a “range of issues” are being explored by officials - although they later tried to dampen speculation about what these were.

But what would a transitional deal with the EU look like and what would it mean in practical terms?

What is a transitional deal?

We don’t know for sure since the Prime Minister is still playing her cards extremely close to her chest, giving zero detail away.

But such a deal is widely presumed to involve Britain leaving the EU, as planned, in 2019 but immediately entering a close trading relationship with the rest of the bloc, such as Norway has as part of the European Economic Area [EEA].

This should be reasonably straightforward since the institution of the EEA already exists and the UK would not have to invent it from scratch.

This arrangement might last for a set period of time, perhaps a couple of years.

Such a transition plan was recommended by the think tank Open Europe in August.

Raoul Ruparel, the former head of Open Europe, is, perhaps significantly, now an adviser to the Brexit Secretary, David Davis.

What would be the point?

It would mean Britain would remain part of the single market.

So goods could be sold tariff free to the Continent.

And, importantly, services could also continue to be sold unimpeded to Europe.

Banks based in the UK would retain their “passport”, meaning they would not have to move large numbers of staff out of London to ensure the continuity of their Continental operations.

The UK would also be able to sign free trade deals with other countries around the world - and it would regain full control on fisheries and agriculture.

But what about free movement of people?

That would continue.

Norway allows free movement with the EU, as do other EEA members.

There would also probably have to be annual payments to the EU Budget from Britain.

But that sounds a lot like being in the EU...

It’s actually more restrictive.

On top of the free movement and budget payments the UK would have to accept and implement the single market rules without having any influence over how they are formulated since we would no longer be in the European Council, or the European Parliament and we would have no European Commissioner.

Wouldn’t that be political suicide for Theresa May?

The way she and her ministers might try to frame it is that we would be, technically, out of the institution of the EU.

And she might emphasise the temporary nature of the transition.

And the practical advantages are clear.

Many trade experts are highly doubtful of the feasibility of the UK negotiating not only the terms of the Brexit divorce with the EU by 2019, but also a comprehensive new trade deal with the bloc by then.

And if the clock runs down without a successful agreement the UK will face having to trade with the rest of the UK on World Trade Organisation terms, meaning our goods exporters would face damaging tariffs.

And then there are 50 plus EU trade deals with countries around the world, from South Korea to Mexico.

The UK would need to negotiate its own pacts with each of these by 2019.

It's a hell of a lot of work for just two years.

Ms May might argue this is all simply impossible and that the only way to take Britain out of the EU by 2019 and to avoid a “cliff edge” for British exporters is to go for the transitional deal.

Sounds reasonable…

Except the pro-Brexit media, hardline Conservatives and UKIP would probably sense a betrayal if this deal was seriously on the table.

They will fear a transitional deal becoming permanent – or maybe even a prelude to the UK returning to the EU in due course if public opinion on Brexit changes.

That is why they are already lobbying for a hard Brexit without any delay - and why Ms May is so reticient about laying out a transition deal even as a possibility.

She may want to keep the transition plan in reserve; to be deployed if the negotiations appear to be going badly or too slowly once Article 50 has been triggered.

Join our new commenting forum

Join thought-provoking conversations, follow other Independent readers and see their replies

View comments