What does a hard Brexit look like?

With no precedent yet set for a country leaving the EU, what existing models could the UK follow, and what do they mean?

A hard Brexit involves a deal whereby the UK leaves not only the EU but the single market and the customs union. In this scenario, the UK would instead aim to secure free-trade deals with the EU, ideally covering both goods and services.
 
A hard Brexit would still require the UK to pay a divorce settlement to the EU as part of a withdrawal treaty, but it would not require the UK to sign up to the free movement of EU nationals or be subject to the European Court of Justice. The UK would also be able to sign independent free-trade deals with any country without any restrictions.
 
There are templates for a hard Brexit already in existence. Most notable of these is the trade agreement between Canada and the EU.
 

The Canada model 

The Comprehensive Economic and Trade Agreement (CETA) deal between the EU and Canada, seven years in the making, gives Canada preferential access to the EU single market for 99% of goods. It does so without all the obligations that Norway and Switzerland – templates for a soft Brexit – have had to meet.
 
There is no general agreement on the free movement of services, however, and the Canada model would not give UK financial services the level of access to the EU market – passporting rights – that it currently enjoys. A UK equivalent would require a far more detailed examination of the services sector.
 
The Canada model would not give UK financial services the level of access to the EU market it currently enjoys.
Canada has the ability to strike independent trade deals with countries around the world and, in contrast with the UK, its deal with the EU didn’t require negotiations around the right of free movement of labour. There is also no budget contribution, although the EU could demand ‘voluntary’ contributions to certain programmes in return for a closer arrangement than that which Canada has struck.
 
While it could for a basis for an agreement, the UK would not be able to implement the Canada model in its current form because its existing ties with the EU are so much more complex. But current rhetoric suggests the EU considers it to be the only option if restrictions around freedom of movement and jurisdiction are to be implemented.
Supporters of a hard Brexit attend a Leave Means Leave rally in September 2018 

A bespoke free-trade agreement

There is also the option for the UK to pursue a bespoke Free Trade Agreement that’s not based on any existing model. Access would depend on details of the agreement and could be wide-ranging or specific to certain goods or services.
 
UK trade with non-EU countries would be conducted through Free Trade Agreements, separate bilateral agreements and on a Most Favoured Nation (MFN) basis. There would be no right to free movement within the EU, no EU influence on UK regulations, and the UK would not be required to pay into the EU budget, although other contributions may be requested.
 

Red lines blurred

Those who seek a hard Brexit cite taking back control – of borders, laws and money – as a major motivating factor. Theresa May has long said that the UK may choose to stay close to EU rules and standards – but a hard Brexit means that sovereignty, decision-making and jurisdictional oversight would return from across the Channel.
 
Returning sovereignty, at a minimum, would mean that the European Court of Justice no longer had jurisdiction over the UK in terms of applying EU law. On the one hand, UK authorities would no longer be required to enforce EU law within UK borders, and UK authorities would have full control of immigration policy.
 
British export producers and service providers would still have to abide by rules set by the EU.
However, British export producers and service providers would still have to abide by any rules set by the EU for activities that they conduct in the region. This would include adhering to existing rules as well as any new rules. The difference is that they are agreed without consulting the UK.
 
A hard Brexit would also lay the foundation for a process whereby hundreds of EU regulations are gradually repealed, replaced or amended by British legislators, causing the country to become less and less compliant with EU law. 
 
The red lines that govern a hard Brexit have clearly become blurred as financial contributions, immigration and jurisdiction are placed on the negotiating table. But the possibility of a hard Brexit remains real. 

Brexit insights and analysis from Investec