Brexit deal outside the single market will cause years of chaos, Nick Clegg warns

Addressing the Lib Dem conference, Mr Clegg will insist that Theresa May needs to ensure a 'positive outcome' on trade

Monday 19 September 2016 09:07 BST

Former deputy prime minister Nick Clegg (Getty Images)

A Brexit deal forcing the UK out of the single market would cause “chaos”, former deputy prime minister Nick Clegg is warning.

Addressing the Lib Dem conference for the first time as the party's Brexit spokesman, Mr Clegg is set to insist Prime Minister Theresa May must ensure a “positive outcome” on trade.

Mr Clegg is demanding more clarity from Dowillwning Street on what the terms of withdrawal will be. The Lib Dem MP is warning “years of chaos” loom for key export industries like cars and financial services unless the Government sets a clear tone.

Mr Clegg is saying: “It is entirely possible to be in the single market but out of the EU, as Norway has shown.

“While it is undoubtedly an inferior option compared to full EU membership, it is the only option that would safeguard jobs and prosperity.

6 ways Britain leaving the EU will affect you

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1/66 ways Britain leaving the EU will affect you

6 ways Britain leaving the EU will affect you

More expensive foreign holidays

The first practical effect of a vote to Leave is that the pound will be worth less abroad, meaning foreign holidays will cost us more

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6 ways Britain leaving the EU will affect you

No immediate change in immigration status

The Prime Minister will have to address other immediate concerns. He is likely to reassure nationals of other EU countries living in the UK that their status is unchanged. That is what the Leave campaign has said, so, even after the Brexit negotiations are complete, those who are already in the UK would be allowed to stay

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6 ways Britain leaving the EU will affect you

Higher inflation

A lower pound means that imports would become more expensive. This is likely to mean the return of inflation – a phenomenon with which many of us are unfamiliar because prices have been stable for so long, rising at no more than about 2 per cent a year. The effect may probably not be particularly noticeable in the first few months. At first price rises would be confined to imported goods – food and clothes being the most obvious – but inflation has a tendency to spread and to gain its own momentum

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6 ways Britain leaving the EU will affect you

Interest rates might rise

The trouble with inflation is that the Bank of England has a legal obligation to keep it as close to 2 per cent a year as possible. If a fall in the pound threatens to push prices up faster than this, the Bank will raise interest rates. This acts against inflation in three ways. First, it makes the pound more attractive, because deposits in pounds will earn higher interest. Second, it reduces demand by putting up the cost of borrowing, and especially by taking larger mortgage payments out of the economy. Third, it makes it more expensive for businesses to borrow to expand output

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6 ways Britain leaving the EU will affect you

Did somebody say recession?

Mr Carney, the Treasury and a range of international economists have warned about this. Many Leave voters appear not to have believed them, or to think that they are exaggerating small, long-term effects. But there is no doubt that the Leave vote is a negative shock to the economy. This is because it changes expectations about the economy’s future performance. Even though Britain is not actually be leaving the EU for at least two years, companies and investors will start to move money out of Britain, or to scale back plans for expansion, because they are less confident about what would happen after 2018

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6 ways Britain leaving the EU will affect you

And we wouldn’t even get our money back

All this will be happening while the Prime Minister, whoever he or she is, is negotiating the terms of our future access to the EU single market. In the meantime, our trade with the EU would be unaffected, except that companies elsewhere in the EU may be less interested in buying from us or selling to us, expecting tariff barriers to go up in two years’ time. Whoever the Chancellor is, he or she may feel the need to bring in a new Budget

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“We won't get a deal from outside the single market which comes anything close to the privileges we have as a member - that is the unavoidable truth that the Tories won't tell you.”

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Brexit deal outside the single market will cause years of chaos, Nick Clegg warns

Addressing the Lib Dem conference, Mr Clegg will insist that Theresa May needs to ensure a 'positive outcome' on trade

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Brexit and beyond email

6 ways Britain leaving the EU will affect you

6 ways Britain leaving the EU will affect you

More expensive foreign holidays

6 ways Britain leaving the EU will affect you

No immediate change in immigration status

6 ways Britain leaving the EU will affect you

Higher inflation

6 ways Britain leaving the EU will affect you

Interest rates might rise

6 ways Britain leaving the EU will affect you

Did somebody say recession?

6 ways Britain leaving the EU will affect you

And we wouldn’t even get our money back

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Brexit deal outside single market will cause chaos, Nick Clegg warns

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