Post-Brexit Options for the UK: Combining Legal and Policy Analysis (CBR project)

Overview

Background

The UK government has faced a major challenge in formulating a clear plan for Brexit.  In March 2017, at the point when notice to leave the EU was triggered under Article 50 of the Treaty on European Union, the UK government’s official position was that departing the EU necessarily entailed leaving the European Economic Area and customs union.  The Prime Minster had previously said that ‘no deal’ was better than a ‘bad deal’.  

Against this background, the CBR, in conjunction with the Cambridge Public Policy Strategic Research Initiative, organised a workshop to explore the legal and economic context of the decision to trigger Article 50.  The workshop took place in Cambridge on 30 March 2017.  Presentations were made on legal issues which include the WTO option, migration, citizen’s rights, the UK’s ‘exit bill’, free movement, taxation, social policy, and the legal mechanics of leaving, including the Great Repeal Act.  There was also a presentation of the latest results on the likely effects of Brexit from the CBR’s economic forecasting model, UKMOD. 

Aims and objectives

The aim of this project, which was supported by the ESRC Impact Acceleration Account, was to carry out legal analysis of the implications of Brexit in the areas of WTO law, free movement of persons, financial services, tax law, labour regulation and transition costs, and to use the legal analysis to inform macroeconomic forecasts carried out using the CBR’s UKMOD forecasting model. A user workshop was held in Cambridge in March 2017 to disseminate the findings of the research.

Results and dissemination

The workshop heard that if there were ‘no deal’, the UK would lose its preferential access to the EU single market, as well as the benefit of numerous bilateral trade agreements which the EU has with third countries. It would, however, continue to be a member of the WTO, and as such would have certain, more limited rights of access to overseas markets including the EU, and the obligation to observe rules of non-discrimination (the ‘most favoured nation’ principle).

The workshop also heard that the economic effects of reverting to WTO rules might not be as drastic as some have thought: the CBR’s UKMOD forecasting model anticipates a more modest impact of Brexit than that predicted by the UK Treasury prior to the June 2016 referendum, in part because a much-needed revaluation of sterling offsets the effects of tariffs. Alleviating the effects of a ‘hard Brexit’ would, however, require the government to adopt fiscal reflation and an accommodating monetary policy, and to take steps to mitigate the impact of higher tariffs on certain vulnerable sectors, in particular agriculture.

This ‘hard Brexit’ would be avoided if a ‘deep and comprehensive’ trade agreement between the UK and EU can be successfully negotiated. While complete agreement along these lines could take up to a decade to reach, a framework deal within the two years allowed by Article 50 is possible. There would also have to be a transitional arrangement to make sure that, as far as possible, there was ‘business as usual’ after March 2019.

While the workshop was taking place, the government published a White Paper setting out its intentions for the ‘Great Repeal Bill’ which will incorporate much of the current corpus of EU law into UK domestic law after Brexit. The consensus at the workshop was that the White Paper, although brief on key points, nevertheless set out a strategy of keeping the UK in line with EU laws and standards, which should make it easier for the two sides to reach agreement on new trading and regulatory arrangements post-Brexit.

However, the workshop heard that the practical obstacles to this outcome remained considerable. The legal complexity involved in reincorporating EU law into UK domestic law was likely to give rise to new constitutional challenges and to uncertainty which will chill business relations. Moreover, until the outlines of a new UK-EU relationship are known, it would be difficult for the UK to forge new trading relationships with third countries.

Blogs and podcasts based on the presentations were placed on the CBR website shortly after the workshop. By July 2017 there had been over 3,000 listens and downloads of these materials.

Project leaders

Simon Deakin
Boni Sones

Project status

Ongoing

Project dates

2016-2017

Funding

ERSC Impact Acceleration Account