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  1. ITV Report

What will trade between the UK and the EU look like post-Brexit?

The European Union and the UK have reached a deal in the first phase of the Brexit talks, and if the deal is agreed by the 27 other EU member states, the second phase of talks can begin on trade and the transition period.

Yet European Council President Donald Tusk has warned that achieving a deal may be "hard".

"We all know that breaking up is hard, but breaking up and building a new relationship, is much harder," the former Polish prime minister said on Friday.

There are two options for how the UK trades with the EU post-Brexit.

The UK could adopt a position similar to Norway.

The Scandinavian country is in the single market, but for access to it, they accept free immigration from the EU, something that would not be welcomed by leave-voters who wanted to exit the EU to bring immigration numbers down.

However, single market access is vital for the UK.

One report said that if Britain leaves it, tariffs on UK exports to the EU could cost the car industry £7.9 billion and retailers £5.2 billion.

Another option for the UK is to achieve a deal similar to Canada's.

The North American nation does not have tariffs on 99% of its EU exports, yet according to one academic this deal would not be welcomed by the financial services sector as there is little provision in it for this field.

However, the UK economy is 80% services, and Canada's deal does not guarantee Canadian firms an EU financial passport.

If this were the case, British firms would not be guaranteed an EU financial passport, incurring huge costs in trade with Europe.

While the Canada-style deal is good news for some, "it depends where you're coming from," explained Professor Catherine Barnard of Cambridge University.

Professor Catherine Barnard says that a Canada-style deal is not good news for everyone. Credit: ITV News

"If you're coming at it from the perspective of the financial services sector it's not great news because the deal has so little in it about services, but if you're looking at it from the perspective of taking back full control of all of our laws, then obviously the Canadian deal gives us very much what we want."

If the UK went for a simple Canada deal, the Treasury estimates it could cost the country around £36 billion, and is the reason why a similar deal for the UK has been referred to as "Canada plus services".

The EU's chief Brexit negotiator, Michel Barnier, has said that a Canada-style deal is the only option for the UK.

Mr Barnier added that a closer Norway-style model is not possible given the Prime Minister's insistence on ending the free movement of EU citizens, gaining the ability to strike free trade deals around the world, and ending the jurisdiction of the European Court of Justice (ECJ) in the UK.

The EU says the UK must either decide to be fully in the single market or out of it, Professor Anand Menon says. Credit: ITV News

"What the EU are making clear to us now, is you have to be slightly off the shelf, you're not going to get something between the Norwegian situation of being out of the club but being in the single market, and the Canadian situation which is a traditional trade deal, you have to pick," explained Professor Anand Menon from Kings College London.

"You're either in the market fully, or you're out of it like Canada, and there's no picking and choosing by sector," he continued.