Brexit: What is the European Economic Area?

Since the UK voted to leave the European Union (EU) on 23 June, there has been a growing number of calls for the country to remain in the single market. While some in the Leave campaign have expressed desire for a new type of deal for the UK, others are gravitating towards a Norway-style deal with the European Economic Area (EEA).

Ben Southwood, head of research at the UK-based libertarian think tank the Adam Smith Institute, agrees that this course of action would be the best for the UK economy. He said, "In one line, the EEA is economic union without political union. So when you are in the EEA you agree to abide by all of the regulations in the single market, and in exchange you have full single market access – including financial passports.

"But we don't have to accept our courts being subordinate to higher authorities, we don't have to accept the common fisheries policy, we don't have to accept the common agricultural policy, and we can sign trade deals with the rest of the world".

If the UK did take this EEA option, they would join countries such as Norway, Switzerland and Iceland in doing so. Those nations are also part of the European Free Trade Association (EFTA), but not members of the EU.

However, one issue that may complicate matters is that under EEA, the UK would have to abide with European freedom of movement, something that became a major issue in the referendum.

Southwood argues, however, that this would be a necessary price to pay to prevent financial meltdown in Britain. "We can either chose to avoid a recession and bring the markets back, and everyone keeps their jobs and we keep a strong economic relationship with Europe, but we have to accept some free movement. Or we go for the recession with no free movement. And I think a recession would be a betrayal of the very people who voted [Brexit] in."

This type of deal has been backed by Morgan Stanley, who said it could help the UK secure a "civilised divorce" from the EU. However, outgoing British prime minister David Cameron has previously said he would "advise against" a Norway-style system.