The 7 scenarios of Brexit

A year on from the UK’s seismic decision to leave the EU, Dan O’Brien considers a series of possible outcomes

OVER recent days, the Taoiseach and other European leaders have signalled to Britain that the door is still open to staying in the EU if Brexit is abandoned.

Last Friday, a YouGov poll showed that while British opinion remained almost as evenly split on leaving the EU as it was when the referendum took place a year ago, there is a clear majority in favour of a ‘softer’ Brexit. Specifically, 58pc of people would accept unlimited immigration from the EU if it meant businesses in the UK retained access to the single market.

British politics is in flux, as illustrated last week when Theresa May’s programme for the new parliament was set out without having secured a deal with the DUP that would enable her to enact the measures contained in it.

With three very complicated moving parts — the dynamic among the 27 EU members, British public opinion and British party politics — a wide range of outcomes is possible from Brexit. Nothing can be predicted with any certainty.

When there is so much uncertainty, it can help to think in terms of scenarios. At this juncture, it would seem that there are seven possible outcomes. Each one is listed below, with a guesstimate probability attached.

1 NO BREXIT PROBABILITY 10pc

This could come about if the current Conservative minority government collapses in the coming months. After another general election, the anti-Brexit parties — the SNP and the Lib Dems — either alone or together, then hold the balance of power and demand a commitment to run a second referendum in return for their support. Either (or both) the Conservatives and Labour concede to this demand to form a government.

Negotiations with the EU produce an exit package that is ultimately rejected by the British people. While it would be somewhat humiliating for any London government to withdraw its application to leave, and there is some legal argument about whether that is even possible, the political will across Europe appears to exist to forget about the whole sorry episode.

This is the best possible and least disruptive outcome from our perspective.

2 THE SOFTEST POSSIBLE BREXIT, WHICH INCLUDES STAYING IN BOTH THE SINGLE MARKET AND THE CUSTOMS UNION PROBABILITY 7pc

This scenario would also require another general election, but for the Labour Party to form a minority government (it is very difficult to see any Conservative government agreeing to Brexit lite). As in the first scenario, the SNP and/or the Lib Dems hold the balance of power, but in this scenario a very soft Brexit is the objective agreed, either without a second referendum or with a vote which is accepted by the British people. The new relationship between the UK and EU is closer than any other third country, such as Switzerland, reflecting the size and importance of Britain.

3 EEA MEMBERSHIP PROBABILITY 3pc

In this scenario, the British political context is the same as in scenario two. But rather than seeking a bespoke agreement, the UK joins Iceland, Liechtenstein and Norway in the European Economic Area. The EEA gives its members access to the EU’s single market and a range of other EU policies, such as education and consumer protection, but it also means accepting EU laws in many areas without having any input to their drafting. For a large country such as the UK to accept such an arrangement over the longer term seems highly unlikely.

4 BRITAIN LEAVES THE SINGLE MARKET BUT STAYS IN CUSTOMS UNION PROBABILITY 25pc

Staying in the EU’s single market includes accepting the free movement of people. But controlling immigration was and is the single most important and emotive issue for Leavers, and both the Conservatives and the Labour Party are now committed to ending free movement. Given that these two parties increased their dominance of British politics in the recent general election, a British exit from the single market seems more likely than a retention of the status quo.

After controlling immigration, the Leave side’s most important issue is regaining the freedom to do trade deals with the likes of the US and China, which is currently not possible — members of the EU impose the same taxes on non-EU countries’ imports, known as the ‘common external tariff ’, meaning that trade agreements can be done only as a bloc.

However, while many people who supported Brexit may have broadly supported the notion of taking back control of trade policy, the downsides of customs checks being imposed with the rest of Europe were not widely discussed or, it would seem, understood (many Brexit supporters still don’t appear to understand the trade-offs associated with trade policy).

The obscurity of the issues involved is very different from ideas around capping the number of immigrants, and much less emotive. A British government could backtrack on leaving the customs union at a much lower political cost than U-turning on the single market. The probability of this outcome is boosted as it could happen under any possible political configuration.

It hardly needs to be said that for Britain to remain in the customs union is particularly important for Ireland given the size of east-west trade flows and the importance of avoiding a hard border on the island.

5 HARD BREXIT WITH AN AGREED TRANSITION PERIOD/DELAYED EXIT PROBABILITY 25pc

In this scenario, Britain leaves the single market and the customs union, but the talks go smoothly and both sides calmly seek to limit the damage of Brexit. Given the complexities, a transition period beyond the departure date in March 2019 is agreed so that the impact of leaving is softened. Either Brexit is delayed by at least one year, or comprehensive transition arrangements are agreed from March 2019.

This would greatly reduce the near-term impact of Brexit for all forms of commerce and would allow time to negotiate a new EU-UK comprehensive agreement.

6 HARD BREXIT WITH NO TRANSITION PERIOD PROBABILITY 20pc

Britain leaves the single market and the customs union in March 2019. No agreement has been reached about the new arrangement, as the talks are acrimonious. Hard-line Brexiteers prevent the minority Conservative government from making concessions and the EU27 remains united against granting those concessions. World Trade Organisation rules apply to trade with immediate effect. A hard border returns on the island of Ireland and east-west trade is hugely disrupted and ultimately reduced.

7 WORST-CASE SCENARIO PROBABILITY 10pc

The negotiations break down acrimoniously over the next year and the hardest possible Brexit happens. This would involve all the negatives of scenario six, but could happen before March 2019 if Britain moved for an immediate ‘clean break’. A quick and acrimonious exit could have further wide-ranging consequences, such as the halting of air traffic, as Ryanair chief executive Michael O’Leary has warned.