So, would you like poutine with that cod? The hash is also good.

As it becomes ever more obvious that the drama post-Brexit is going have several, if not many acts, commentators keep trying to square the circle in terms of describing any “settlement” with the EU should Article 50 actually be invoked, while those who engineered the Leave outcome flail about uselessly, trying to deal with the consequences that some of them at least may well not have actually wanted.

However, if the referendum’s message was that a significant segment of the UK’s population wanted “control”, where does that leave anyone trying to negotiate a post-Brexit compact with an EU political and bureaucratic establishment that is demonstrably caught between not wanting the UK to leave, yet also not wanting to be seen to be “soft” and thus capable of being “blackmailed” by any other member that takes it into its collective head to “re-negotiate” its terms of membership.

The irony is that, with its various “opt-outs”, the UK already has a somewhat more flexible arrangement than most other members, yet benefits from the freedoms of movement of capital, labour, goods and services with the Single Market..

Still, let us suppose that Article 50 is invoked and the 2-year timeframe envisaged by it begins. What then? What are potential permutations?

In reality, they comprise a spectrum from Modified Full EU (MFEU- which would currently be improbable in the circumstances) to Basic WTO.

MFEU would probably amount to having access to all the components of the Single Market, but some form of control over immigration and movement of labour, but without having the element of control that EU membership permits. A commonly-cited variant is the “Norwegian model”, whereby membership of the European Economic Area (EEA) gives broad access, but at the price of contributing the EU budget and submitting to its acquis of laws and regulations- friends with benefits, but no control.

A step down from that would be the “Swiss model”, whereby as a member of the European Free Trade Area (EFTA), and subject to multiple bilateral and EU agreements (but not passporting), Switzerland has broad access, but also no control and still has to make contributions to the EU budget. Crucially, it also has to allow free movement of labour- something which is causing potential conflict, as the Swiss seek controls and the EU threatens to suspend its market access. Not promising!

Canada recently concluded a free trade agreement with the EU, although it has yet to be ratified and implemented and does not encompass all goods and particularly financial services. Again, less than ideal.

And finally, if all else fails, and no agreement can be reached with the 2-year timeframe required (absent unanimous agreement to extend) by Article 50, the UK (assuming it still was the UK by then!) could fall back on mutual membership of the World Trade Organization (WTO), with some protection against tariffs, but facing the risk of little or no access for services as well as the often effective and discriminatory “non-tariff barriers” beloved of petty bureacrats.

All in all, the term “hash” is about right when it comes to the current consequences of the Brexit vote. In truth, at this stage, no-one knows the likely outcome, because there are no real precedents; and the parties involved are not only divided into the EU and the UK, but also fragmented within themselves, as factions jostle for advantage and everyone dusts off their game theory textbooks.

From Awbury’s viewpoint, we are comfortable that the Group’s position remains sound; and continue to research the opportunities that are likely to flow from the current uncertainty and dislocation.

The Awbury Team

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