Brexit: Exit, and trade doors will slam shut behind us

Picture the scene in the weeks after a Leave vote on June 23. The pound is plummeting, as is the FTSE. David Cameron steps down immediately, triggering a leadership campaign in a deeply divided Tory party, ushering in a new Prime Minister and a Cabinet purged of pro-European Union ministers.

Nicola Sturgeon, on the back of a clear Remain vote in Scotland, demands another independence referendum. EU leaders, meanwhile, say they respect the decision of the British electorate, will negotiate Britain’s withdrawal as per the provisions of the Lisbon Treaty, but will not be offering any special trade arrangements for the UK.

As the months go by, uncertainty about Britain’s future weighs ever more heavily. Unemployment rises, triggering rate cuts and more quantitative easing from the Bank of England. All this time, while negotiations on the UK’s exit make progress, it becomes increasingly obvious that the rest of the EU is remaining good to its word: full access to the single market is only available in return for free movement of people, something that the Eurosceptic government will not contemplate.

Firms, faced with the certainty of being outside the single market, start to announce plans to adapt with foreign-owned banks, in particular, grabbing the headlines as they announce plans to relocate.

Meanwhile, opinion polls in Scotland show that the Scottish National Party will overwhelmingly win the referendum, this time with the rest of the EU offering continued membership if Scots do vote to leave the UK, triggering more economic uncertainty, particularly around the large Scotland-based banks. Slowly, it dawns on many of those that were seduced by the goal of greater sovereignty that the economic consequences are much larger than they were led to believe.

The polls shift decisively, away from a Government that is presiding over a crumbling country and economy. Prime Minister Boris Johnson falls on his sword and, in a turnaround to end all turnarounds, his replacement George Osborne — surrounded by a phalanx of pro-EU Tories, declares without quite saying “I told you so” that the British people deserve another chance to decide on this most important of questions.

The Leave campaign, having had its delusions about what a post-Brexit world looks like cruelly exposed, are defeated heavily — the vote is 70%-30% to reverse the previous decision. The question that had first split the Tory party, and then the country, is decisively answered for a generation. But only after the economy has taken a battering.

Fanciful Project Fear stuff? Maybe. Maybe not. Certainly, the weight of the economic argument against Brexit is growing by the day. It is already clear that the uncertainty for firms caused by the referendum is hitting economic activity. That will only intensify in the run-up to June 23.

The uncertainty primarily revolves around what the post-Brexit trading arrangements with the world’s largest trading bloc will look like. And this is a question that the Brexiteers have been unable to answer coherently. The Canadian, Swiss and Norwegian options are bandied about, while Michael

Gove earlier this week suggested

that the UK should aspire to the Albanian model.

But only the Norwegian model would provide the UK with full membership of the single market. And that would require accepting both free movement of people (unacceptable to most Brexiteers) and the single market’s regulations. Oh, and we’d still have to pay into the EU budget.