In an ideal world, the U.K. would like access to the single market (seen as one of the EU's greatest assets) and would also like to retain the financial sector's access to the EU too – known as "passporting" – but without the freedom of movement (that is, immigration) that such access entails.
Dream on, the EU has said, quick to disabuse the U.K. of the notion that it can "cherry-pick" on EU rules. It has said that if the U.K. wants to continue to have access to the single market, it must join the European Economic Area (EEA) – an extension of the single market to other European countries that are not in the EU, such as Norway.
As such, the "Norway option" has become a bit of a buzzword among analysts discussing whether it could be the best of what most agree is a bad situation with £100 billion already wiped off Britain's FTSE 100 index.
However, both Norway and Switzerland (which is neither an EU nor EEA member) have agreed to take on aspects of EU legislation in exchange for accessing the EU's single market.
Members of the EEA are required to apply relevant free movement of goods, persons, services and capital along with a host of other regulations un areas such as transport, competition, consumer protection and the environment. Agriculture and fisheries are not covered by the EEA agreement.
Unlike EU states, EEA members have no say over decision-making in Brussels but have to abide by EU rules – an option hardly likely to be popular in Britain but one it might have to accept if it wants to maintain the full economic benefits of the EU and access to its 500 million inhabitants.
Economists at JPMorgan David Mackie and Malcolm Barr said in a note on Tuesday that "it was very unlikely" that the U.K. would, as "leave" campaigners hope, get "full access to the single market but no EU oversight, contributions to the EU budget or acceptance of the free movement of labor."
Not all analysts think that a "Norway-style" EU relationship is impossible, however. Political analyst Alastair Newton, co-founder and director at Alavan Business Advisory, said on Tuesday that he was confident that the U.K. would win some kind of single market access – particularly given that EU exporters like Germany will be keen to continue to have "unfettered access" to the U.K. market too.
"My base case remains that the U.K. will ultimately negotiate continued access to the single market Norway-style despite significant hurdles to overcome both among the 27 (EU nations) and at home," he said in a note.
"I think that ultimately the offer of a Norway-type relationship will be on the table, i.e. including free movement of labor, and will be reluctantly accepted by the Westminster government," he said.