A new deal for Britain

published 27 June 2016

There are several perfectly good paths for us to follow post-Brexit, says Merryn Somerset Webb.

What's the right model for a post-Brexit UK? This is now set to be discussed for several years now. But there are several perfectly good paths for us to follow. There's full Brexit, which would leave us with full control over everything from agriculture to justice and immigration, but dependent on international rules to trade. This, contrary to popular belief, is a perfectly good option for the UK. Plenty of countries outside the single market trade very successfully inside it and there is no reason we shouldn't either. Norman Lamont looked at this in The Daily Telegraph just before the vote. One of his key points is this: the cash we pay into the EU every year comes to the equivalent of about 7% of the value of our exports to the EU. We are effectively paying a 7% tariff to avoid what would otherwise be a 3% tariff. Which seems a bit silly.

Next, there is the obvious and less tricky option of being inside the European EA and the European Free Trade Area (EFTA). Norway, Iceland, Switzerland and Liechtenstein are members (Switzerland is the only one which is in EFTA but not the EEA, but it has a bilateral agreement with the EU which gives a similar result). Iceland's banking crisis aside, all are pretty successful. There's a good explanation of why it could work for us from Phil Hendren, writing on medium.com, but in essence, it's a simple argument. Being in it would mean that we followed all the rules of the single market as they are now in order to have access to it, and that we make choices about all new laws if we want access to that bit of the market we implement them. If we don't, we don't. However, we also "regain or cement control" over areas such as crime and punishment, foreign policy, defence, international development, agriculture, fisheries, justice, and areas of social policy unrelated to the single market. Crucially, we could also regain the ability, as Norway does, to make our own trade deals outside of the EU (the EU is really lousy at making trade deals).

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The objections to the EFTA over the EU are the usual ones. First, we would have no say in the rule making. But we have no say in the rule making anywhere else we trade "when the EU trades into the US, it follows American rules". Secondly, that we would still have to pay to be in. We would. But as Hendren points out, it's a different kind of paying: not a full contribution to the EU budget, but a fee for access to the single market. Think of it like a golf club: when you pay green fees "you never hear anyone say you're contributing to the budget of the golf course with no say over how they spend it!' yet that is what an EFTA relationship is really. Instead of paying tariffs on everything we export into the market, we pay a flat fee per year and play as much golf as we like." There is also a contribution to reduce "social and economic disparities in Europe" under the EEA, but nonetheless, the final cost should be much lower than EU membership.

There is, of course, also the matter of the free movement of people: EFTA/EEA membership would mean the four freedoms', of which this is one, remain. This might be a deal breaker for some. But given the upsides we aren't sure it should be and there is always the chance that the UK could strike a new/different EEA style deal anyway. Finally, it is worth pointing out that this could be a remarkably easy transition. In order to join EFTA you have to follow all the rules of the single market. We already do that. So in terms of trading there would be no real change at all in the short term. No economic Armageddon, just a big step back from most of the bits of the EU we aren't mad for.

Merryn Somerset Webb started her career in Tokyo at public broadcaster NHK before becoming a Japanese equity broker at what was then Warburgs. She went on to work at SBC and UBS without moving from her desk in Kamiyacho (it was the age of mergers).

After five years in Japan she returned to work in the UK at Paribas. This soon became BNP Paribas. Again, no desk move was required. On leaving the City, Merryn helped The Week magazine with its City pages before becoming the launch editor of MoneyWeek in 2000 and taking on columns first in the Sunday Times and then in 2009 in the Financial Times

Twenty years on, MoneyWeek is the best-selling financial magazine in the UK. Merryn was its Editor in Chief until 2022. She is now a senior columnist at Bloomberg and host of the Merryn Talks Money podcast - but still writes for Moneyweek monthly.

Merryn is also is a non executive director of two investment trusts – BlackRock Throgmorton, and the Murray Income Investment Trust.