Brexit will change the way the UK trades with the EU. With almost half of British exports sold to Europe, our future access to the single market has become an important issue.
But just what is the single market and why do we need it?
For a nation to join the EU single market it must accept the four freedoms which the market is built upon: Freedom of goods, people, services and capital.
If a country does not accept these conditions the EU will not allow it to trade freely within the market, which is made up of more than 500m people.
Once these conditions have been met, the single market operates through a series of internal regulations that allow members to trade among themselves without hinderance or prejudice.
The regulatory framework prevents individual countries or companies from gaining an unfair advantage through the use of less strict regulations.
Member states work within a universal set of rules that apply throughout the entire market.
Thus, each country recognises and abides by the rules of all the other nations and their companies can sell products and services in exactly the same way they would in their own country – reducing trade costs and providing a larger trading area.
If the UK does not strike a deal with the EU during the negotiations, and instead falls back on World Trade Organisation rules, exporters will face tariffs of more than £6bn a year, research shows.
Even with a trade deal in place, leaving the single market will still cause a headache for many businesses who trade within the EU.
The services sector, which accounts for 80 percent of the UK’s economy, will face difficulties because most free trade deals exclude services.
To strike a services deal with the EU, Britain will most likely have to comply with the free movement of people – something Theresa May has said she is not willing to do.
For those sectors of the economy that rely on migrant labour, leaving the single market is expected to lead to a shortfall in skills and staff.
Although the possibility of EU trade deals for goods among individual sectors could more easily be achieved, leaving the single market still poses many problems.
European companies will need to check any UK goods they are buying to ensure they comply with regulations, giving EU competitors an ease of use advantage over British-based firms.
UK exports not subject to a free trade deal could be more expensive because of tariffs, while importing EU goods to the UK may also increase in cost.
Furthermore, if European regulations change and the UK does not make the same amendments to its own rules or implements different ones, British companies wishing to export to the EU will have to comply with both sets of standards.
Exiting the single market and the mutual recognition of standards it entails, risks an increase in time consuming border inspections because EU officials will need to check that goods entering the continent comply with regulations.
This could damage integrated supply chains used in industries such as the automotive and aerospace sectors and hinder those who rely on “just in time” production and delivery methods, as well as being a nuisance for general cross-border trade.
More information on the EU customs union can be found here.