Norway's relationship with EU held up as post-Brexit model

The Adam Smith Institute predicts that in the event of a Brexit on 23 June the UK would likely have to join the European Economic Area (EEA) because that option would be the only one possible to achieve within a two-year, treaty-defined time frame.

The EEA option would offer the UK political freedom while also allowing the country to participate in the single market.

Leave campaigners have suggested the UK could strike its own trade agreement in the wake of Brexit.

But the report warns that the EU will make it difficult for the UK to negotiate a tailored deal in order to discourage other member states from trying to leave.

Meanwhile, it points out that under Article 50 of the Lisbon Treaty, which sets out how a country can leave the EU, the UK would have just two years to negotiate its own deal.

As a result, the think tank points to the EEA option as potentially the best bet for the UK.

Sam Bowman, executive director of the Adam Smith Institute, said: “The EEA option gives Britain the best of both worlds if we leave the EU: economic integration without political union.

“Under this arrangement, the free movement of goods, capital, services and people would be protected, but the UK would be freed from the EU’s mad, corporatist agricultural policies and tariffs, which drive up the price of imported food and subsidise unproductive farmers.

“Britain’s contributions to the EU could be cut in half.”

Membership of the EEA is a position currently held by Iceland, Liechtenstein and Norway. It allows those countries to access the Single Market but from a position outside the EU.

They are therefore outside the influence of the EU’s political will and are not bound by things like the Common Agricultural Policy.

The EEA position would allow the UK to strike trade agreements with third countries and to set its own levels of VAT.