New research by Change Britain shows that a huge £24 billion a year prize is on offer if the UK Government pursues a ‘clean Brexit’ and decides to leave the EU’s single market and customs union. The UK would be over £450 million a week better off through a mixture of taking back control of the money we give to the EU each year, lower regulatory burdens on British businesses and through striking trade deals with growing parts of the world’s economy.

If MPs like Nick Clegg and Ed Miliband get their way and try to keep the UK in the EU’s single market and customs union none of these benefits would be realised.

Research shows that:

  • Leaving the EU’s customs union will give the UK the chance to strike new trade deals, bolstering exports. Depending on how many the UK secures, the boost to GDP from these new agreements varies between £8.5 billion and £19.8 billion.
  • Scrapping some burdensome EU regulations – while still protecting workers’ rights – could save British businesses between £1 billion and £4 billion a year.
  • The UK will save over £10 billion a year (net) from not having to pay into the EU budget anymore.
  • This paper therefore calculates that the total benefits of leaving the EU’s single market and custom union could be between £20.1bn and £38.6bn a year.
  • The Government has already confirmed that it will protect workers’ rights and that it will continue to provide funding to bodies and businesses currently in receipt of EU funds. Taking these decisions together with a conservative estimate of the number of countries the UK will be able to strike free trade deals with, Change Britain estimates the likely boost to the UK economy from leaving the EU’s single market and customs union is nearly £24 billion a year or £450 million a week.

All figures in £ millions

Low estimate High estimate Likely
Savings from no longer having to contribute to EU budget £10,353.00 £14,680.00 £10,353.00
Gains from scrapping burdensome Single Market rules £1,219.59 £4,043.17 £1,219.59
Predicted impact on exports from leaving the customs union £8,525.16 £19,845.04 £12,294.18
Total £20,097.75 £38,568.21 £23,866.77


Commenting, Change Britain supporter Charlie Elphicke said:

“This report makes it clear that there are huge opportunities to be had from making a success of Brexit. Leaving the EU fully means we won’t have to pay billions to bloated Brussels bureaucrats. It means we will be able to take back control of our borders and end uncontrolled EU immigration.

‘What’s more, we’ll be able to spend money on the things that matter to the British people. We can build a modern Britain that puts the hard working classes first and makes it easier for British businesses to trade in the world and succeed.

‘This is what people voted for in the referendum. Now everyone, Remainer or Leaver, has a duty to get on with the job of delivering a brighter future for our land.’

 

 

Notes to Editors

Leaving the EU’s single market will save us billions in contributions

Countries that are members of either the EU or the European Economic Area (EEA) are considered to be members of the EU’s single market. These countries have to pay billions into the EU budget each year. Countries that are outside the EU/EEA, but which have a free trade deal with the EU, do not have to make budget contributions, despite having tariff-free access to European markets (European Commission, March 2015, link). The amount that the UK could save from leaving the EEA and no longer having to pay into the EU budget depends on whether or not it decides to keep funding the various UK bodies that currently receive EU funding – such as farmers and universities. If it decides to keep subsidising these bodies, the Treasury will only be able to save the net amount, while if it decides to retain all the money it will be able to save the gross amount.

The table below shows the UK’s contributions to the EU in 2015:

All figures in £ millions

EU membership fee (2015)
UK gross contributions to EU budget £19,593.00
UK gross contributions to EU budget, net the rebate £14,680.00
UK net contributions to EU budget £10,353.00

Source: ONS, link

Therefore, the UK can expect to save between £10.4bn and £14.7bn per year – depending on how far it continues to subsidise organisations that benefit from EU funding.

It is not clear how much the UK will be expected to contribute to the budget were it to remain a member of the EEA, though similar proportions to what the UK is paying now should be expected. As Open Europe noted, in 2015 Norway made a per capita net contribution of €107.4, similar to Britain’s net contribution of €139 per capita (Open Europe, October 2015, link). We believe that the lower estimate of £10.4bn is more likely to reflect the actual savings. This is because the Government has made clear that it will guarantee EU funding for structural and investment fund projects, including agri-environment schemes (HM Government, October 2016, link) and bodies that receive funding from the European Commission under, for example, the HORIZON 2020 scheme (HM Government, August 2016, link).

Leaving the EU’s single market will allow the UK to save billions by scrapping expensive regulations

The second principal cost is the EU’s single market regulations. As an EEA member, the UK will still be restrained by much of the EU red tape that it currently has to deal with. That is because the EU makes many of its laws applicable to EEA members as well, stating that the law has ‘EEA relevance’.

The UK Government’s own Impact Assessments reveal the huge costs of these regulations to British businesses. Open Europe compiled a list of the Impact Assessments of the 100 most burdensome EU regulations to British business. By taking these 100 impact assessments, it is possible to work out which ones are ‘single market’ laws by investigating the legal basis under which the EU adopted each law, stripping out all laws that are not marked as ‘EEA relevant’.

This reveals that 59 of the 100 laws stem from EU single market legislation and have effect in the EEA (full details of these laws are provided in the annex). However, these figures are of only limited value as, in reality, the UK is likely to only repeal some of these laws. This is because many of these laws stem from international agreements, while others reflect the UK’s political priorities (such as tackling climate change or providing workers’ rights).

It is possible to further refine the list, to only count laws that are not part of international agreements, and which either the current Government or the Cameron Government criticised. By looking at HM Government’s impact assessments for these laws, it is possible to calculate a ‘gross’ cost (where it is assumed that the law only has a negative effect on the economy) and a ‘net’ cost (where the negative effective is mitigated by other factors).

All figures in £ millions

Potential savings from scrapping EU red tape
Gross figure £4,043.00
Net figure £1,220.00


Again, we expect the lower, net figure saving to be more accurate. This is because HM Government has been clear that it believes there are some economic benefits that accrue from these regulations, and though there are serious questions over the validity of Impact Assessments benefit calculations (Open Europe, March 2015,
link), these are taken at face value for the purpose of this study.

Leaving the EU’s customs union will allow the UK to earn billions by securing improved trade deals

As a member of the EU, the UK is not allowed to strike its own free trade agreements. Instead, it has to rely on the European Commission (TFEU, art. 207, link). If, after it leaves the EU, Britain decides to remain in the customs union it will continue to be subject to this regime and will be unable to expand its trading opportunities. If the UK leaves the customs union, it will be allowed to strike its own trade deals. This will generate billions in additional revenue for the UK. It is possible to calculate how much via the EU’s own trade modelling. In July 2012, DG TRADE produced research, which estimated the possible effect certain trade deals might have on exports (European Commission, July 2012, link). By dividing the EU figures by the UK’s proportion of extra-EU trade – 14.99% in 2015 – it is possible to calculate the UK’s increase of exports. (European Commission, 2016, link).

All figures in £bn

Not asked for trade deal with UK Asked for a trade deal with UK
USA Japan ASEAN India Mercosur China Canada Korea TOTAL
EU figures
Predicted impact on exports (€bn) 29.4 25.2 33.7 11.6 13.7 1.4 14.6 25.2 154.8
UK figures
Predicted impact on exports (€bn) 4.4 3.8 5.1 1.7 2.1 0.2 2.2 3.8 23.3
Predicted impact on exports (£bn) 3.8 3.2 4.3 1.5 1.8 0.2 1.9 3.2 19.9


Of these, several countries have already expressed an interest in striking deals with the UK, including India, Mercosur, China, Canada and Korea. Therefore, were the UK to strike deals with just the countries that have expressed an interest in negotiating with the UK would create £8.5 billion worth of exports, while striking a trade deal with all the countries in this list would increase exports by £19.9 billion.

We believe that the benefits here will be more substantial than just the countries that have already expressed an interest in having a trade deal. Since the US Presidential election, the incoming administration has stated that it will look to prioritise a UK-US free trade deal. We therefore think that, in addition to adding together the countries that have already said that they want a free trade deal, the United States should be added to the list as well. This creates a potential gain of £3.8 billion. In all likelihood this is an underestimate – the collapse of the Trans-Pacific Partnership (TPP) is likely to result in both Japan and ASEAN wanting a trade deal with the UK however, because these countries have not yet approached the UK we will not count them in our ‘likely’ scenario.

Conclusion

By adding together the UK’s possible savings from no longer having to pay into the EU budget, the economic gains from scrapping harmful EU red tape and also the predicted impact on exports from leaving the customs union, we can work out how much the UK will benefit from leaving the single market and the customs union:

All figures in £ millions

Low High Likely
Savings from no longer having to contribute to EU budget £10,353.00 £14,680.00 £10,353.00
Gains from scrapping burdensome Single Market rules £1,219.59 £4,043.17 £1,219.59
Predicted impact on exports from leaving the customs union £8,525.16 £19,845.04 £12,294.18
Total £20,097.75 £38,568.21 £23,866.77


It is worth noting that this is a very conservative estimate, since the red tape costs, for example, take into account just a few dozen EU regulations, and assumes that the Government has correctly calculated the cost of regulation in its impact assessments. In addition, the predicted impact of trade deals considers only a handful of countries. It nonetheless shows that, at least, the UK Government and British businesses should be able to secure nearly £24 billion of savings outside the EU – or over £450 million per week.

Annex – 59 regulatory costs that can be avoided outside the Single Market

£ millions

The 59 most expensive regulations Likely regulatory savings
UK legislation Cost (gross) Cost (benefit) Savings (gross) Savings  (net)
UK Renewable Energy Strategy £4,670.94 £333.64 n/a – the UK will likely keep regulation, because it is based on international law (Kyoto Protocol)
CRD IV £4,590.00 £15,555.00 n/a – the UK will likely keep regulation, because it is based on international law (Basel III)
EU Climate and Energy Package £3,425.57 £20,838.91 n/a – the UK will likely keep regulation, because it is based on international law (Kyoto Protocol)
Alternative Investment Fund Managers Regulations 2013 £1,532.49 £0.00 n/a – the UK will likely keep regulation, because it is based on international law (2009 G20 London summit)
Motor Vehicles (EC Type Approval) (Amendment) Regulations 2008* £1,303.73 £1,152.33 £1,303.73 £151.40
Data Protection Act 1998 £1,058.83 £0.00 £1,058.83 £1,058.83
Motor Fuel (Road Vehicle and Mobile Machinery) Greenhouse Gas Emissions Reporting Regulations 2012 £757.80 £757.80 £757.80 £0.00
Road Transport (Working Time) Regulations 2005; The Road Transport (Working Time) (Amendment) Regulations 2012 £624.89 £101.02 n/a  – Government didn’t highlight this in its red tape review
Genetically Modified Food (England) Regulations 2004; two other Regulations £384.32 £0.00 £384.32 £384.32
Financial Services and Markets Act 2000 (Markets in Financial Instruments) Regulations 2007; five other Regulations £283.87 £530.38 n/a – n/a – the UK will likely keep regulation, because it is based on international law
Vehicle Drivers (Certificates of Professional Competence) Regulations 2007 £235.65 £719.91 £235.65 -£484.26
Solvency II Directive £209.66 £465.90 n/a – the UK is very unlikely to alter this, as it has already implemented risk-based regulation under the domestic Individual Capital Adequacy Standards.
Consumer Credit (EU Directive) Regulations 2010; four other Regulations £155.09 £259.75 n/a  – Government didn’t highlight this in its red tape review
Non-Road Mobile Machinery (Emission of Gaseous and Particulate Pollutants) (Amendment) Regulations 2006 £148.79 £0.00 £148.79 £148.79
Fluorinated Greenhouse Gases Regulations 2009 £129.26 £191.83 n/a  – Government didn’t highlight this in its red tape review
Financial Services and Markets Act 2000 (Regulated Activities) (Amendment) (No. 2) Order 2003 £116.99 £0.00 n/a  – Government didn’t highlight this in its red tape review
Eco-design Directive – Implementing measures for circulators £106.19 £138.16 n/a  – Government didn’t highlight this in its red tape review
Motor Vehicles (Replacement of Catalytic Converters and Pollution Control Devices) Regulations 2009 £78.79 £95.35 n/a  – Government didn’t highlight this in its red tape review
Eco-design Directive – Implementing measures for standby and off-mode losses £61.09 £296.31 n/a  – Government didn’t highlight this in its red tape review
Eco-design Directive – Implementing measures for electric motors £60.52 £301.45 n/a  – Government didn’t highlight this in its red tape review
Money Laundering Regulations 2007 £59.21 £36.53 n/a – n/a – the UK will likely keep regulation, because it is based on international law
Consumer Contracts (Information, Cancellation and Additional Charges) Regulations 2013 £57.94 £366.69 n/a  – Government didn’t highlight this in its red tape review
Pressure Equipment Regulations 1999 £55.31 £0.00 n/a  – Government didn’t highlight this in its red tape review
Eco-design Directive – Implementing measures for TVs £54.81 £165.57 n/a  – Government didn’t highlight this in its red tape review
Eco-design Directive – Implementing measures for air conditioners £50.92 £141.92 n/a  – Government didn’t highlight this in its red tape review
Eco-design Directive – Implementing measures for household lamps £50.24 £212.96 n/a  – Government didn’t highlight this in its red tape review
Registration, Evaluation, Authorisation & Restriction of Chemicals (2006) £46.44 £1.85 £46.44 £44.59
Payment Services Regulations 2009 £42.65 £9,623.36 n/a  – Government didn’t highlight this in its red tape review
Motor Fuel (Composition and Content) and Merchant Shipping (Prevention of Air Pollution from Ships) (Amendment) Regulations 2010 £37.92 £4.33 n/a  – Government didn’t highlight this in its red tape review
Civil Aviation (Denied Boarding, Compensation and Assistance) Regulations 2005 £34.89 £0.00 £34.89 £34.89
Transfer of Undertakings (Protection of Employment) Regulations 2006 £31.94 £25.11 n/a – based on international law
Payments to Governments and Miscellaneous Provisions Regulations 2014 £31.56 £0.00 n/a  – Government didn’t highlight this in its red tape review
Producer Responsibility Obligations (Packaging Waste) (Amendment) Regulations 2014 £29.10 £29.70 £29.10 -£0.60
Batteries and Accumulators (Placing on the Market) Regulations 2008; Waste Batteries and Accumulators Regulations 2009 £18.50 £0.97 £18.50 £17.53
Eco-design Directive – Implementing measures for tertiary lighting £15.42 £167.85 n/a  – Government didn’t highlight this in its red tape review
Eco-design Directive – Implementing measures for simple set-top boxes £14.79 £79.94 n/a  – Government didn’t highlight this in its red tape review
Undertakings for Collective Investment in Transferable Securities Regulations 2011 £10.59 £0.00 n/a  – Government didn’t highlight this in its red tape review
Eco-design Directive – Implementing measures for washing machines £10.28 £27.40 n/a  – Government didn’t highlight this in its red tape review
Road Vehicles (Approval) Regulations 2009 £10.21 £0.00 n/a  – Government didn’t highlight this in its red tape review
Electronic Communications and Wireless Telegraphy Regulations 2011 £9.53 £0.38 n/a  – Government didn’t highlight this in its red tape review
Railways and Other Guided Transport Systems (Safety) Regulations 2006; Railways (Access to Training Services) Regulations 2006 £9.42 £0.00 n/a  – Government didn’t highlight this in its red tape review
Welfare of Animals (Transport) (England) Order 2006 £9.28 £0.00 £9.28 £9.28
Pesticides (Maximum Residue Levels) (England and Wales) Regulations 2008 £8.85 £0.00 n/a  – Government didn’t highlight this in its red tape review
Tobacco Products (Manufacture, Presentation and Sale) (Safety) Regulations 2002 £7.93 £65.44 n/a  – Government didn’t highlight this in its red tape review
Statutory Auditors and Third Country Auditors Regulations 2007; Partnerships (Accounts) Regulations 2008 £7.89 £0.00 n/a – based on international law
Eco-design Directive – Implementing measures for external power supplies £7.76 £11.53 n/a  – Government didn’t highlight this in its red tape review
Cocoa and Chocolate Products (England) Regulations 2003 £6.99 £0.00 n/a  – Government didn’t highlight this in its red tape review
Reports on Payments to Governments Regulations 2014 £6.73 £0.00 n/a  – Government didn’t highlight this in its red tape review
The Road Vehicles (Testing) (Miscellaneous Amendments) Regulations 2013 £6.67 £3.81 n/a  – Government didn’t highlight this in its red tape review
Electricity and Gas (Internal Markets) Regulations 2011 £6.37 £16.41 n/a  – Government didn’t highlight this in its red tape review
Welfare of Farmed Animals (England) (Amendment) Regulations 2010 £6.37 £115.05 £6.37 -£108.68
Sheep and Goats (Records, Identification and Movement) (England) Order 2009 £5.58 £2.69 £5.58 £2.89
Restriction of the Use of Certain Hazardous Substances in Electrical and Electronic Equipment Regulations 2012 £5.51 £0.31 n/a – Government unlikely to repeal owing to worker’s rights commitments
Companies Act 2006 (Amendment) (Accounts and Reports) Regulations 2008; three other Regulations £3.89 £43.28 £3.89 -£39.39
Ship and Port Facility (Security) Regulations 2004 £3.83 £0.00 n/a  – Government didn’t highlight this in its red tape review
Railways (Interoperability) Regulations 2011 £2.60 £13.85 n/a  – Government didn’t highlight this in its red tape review
Eco-design Directive – Implementing measures for dishwashers £2.23 £15.64 n/a  – Government didn’t highlight this in its red tape review
Road Vehicles(Registration and Licensing) (Amendment) (No. 2) Regulations 2012 £2.12 £0.64 n/a  – Government didn’t highlight this in its red tape review
Flavourings in Food (England) Regulations 2010 £1.84 £0.94 n/a  – Government didn’t highlight this in its red tape review
Total £20,718.58 £52,911.89 £4,043.17 £1,219.59

Source: Open Europe, March 2015, link

* Savings may be limited due to the UK having to still comply with UNECE regulations