Imagine the British people vote to quit the European Union in the referendum David Cameron has promised to hold by 2017. What happens next? What, if any, special relationship would the UK seek to retain with the EU? Would it be able to negotiate what it wanted? And how would the economic damage unleashed by years of uncertainty be kept to the minimum?
These questions arenít just troubling British businesses, the vast majority of which want to stay in the EU so they can enjoy full access to its single market. They are also worrying some eurosceptics who are concerned that, even if it would be good for Britain to quit the EU, the process of getting from A to B could be messy.
Hence, the launch of a 100,000 euros prize by the Institute for Economic Affairs, a UK eurosceptic think-tank. It will announce later this month the shortlist for the best essay to answer the question of what measures are needed to ensure a free and prosperous economy after an ďoutĒ vote in a putative referendum.
But donít get your hopes up. The last time British eurosceptics launched a high-profile essay prize, the Wolfson Prize, it was to work out the best way for a country such as Greece to quit the euro. The winner, Roger Bootle, who is incidentally one of the judges of the IEA prize, came up with a not terribly realistic scheme based on maintaining secrecy until the last minute.
The main reason to worry that leaving the EU could be messy is because it wonít be clear after an ďoutĒ vote what relationship the British people will want to keep with their former partners. In particular, it wonít be obvious whether the electorate wants to stay in the EUís single market or to leave that as well as the European political framework.
Losing full access to the single market would be economically damaging. After all, nearly half of the UKís trade is with the EU. Many companies invest in Britain not just because of its flexible labour markets and English language, but also to use it as the spring-board to sell across the whole EU. Thatís why big investors such as Goldman Sachs and Nissan have been arguing that Britain shouldnít quit.
So, why not retain access to the single market while quitting the EU? That may be possible. After all, Norway has such an arrangement by virtue