Soon after the referendum that decided the UK would leave the European Union (EU), concerns were raised about the level playing field (LPF) that would or would not prevail in the economic relationship between the UK and the rest of the EU post-Brexit. In essence, LPF considerations focus on the notion of unfair competition, with a level playing field being defined as “a state in which conditions in a competition or situation are fair for everyone”. These concerns relate both to firm-level/sectoral interventions through, for example, state aid and subsidies, and more horizontal public policy interventions with systemic impact, such as corporate taxation, labour standards or environment/climate change policies.
Despite the very close economic relationship that will continue to exist even after the UK leaves the EU, the UK will no longer automatically be bound by EU rules after Brexit unless the UK remains subject to single market rules, for example if the UK were to remain a member of the European Economic Area. This has raised concern among EU leaders that UK businesses could gain an unfair competitive advantage, accidentally or by design, if the regulatory and policy environment were to create a more favourable (lower costs, less stringent regulation) environment in the UK post-Brexit. In extremis, the worry is that over time, the UK could move away from the European economic model and shift towards a ‘low tax, low regulation’ economy. EU leaders fear that this would trigger a regulatory race to the bottom, undermining competitiveness in the remaining member states and imposing costs on EU citizens and companies, for example through cross-border air pollution if the UK slashes environmental regulations.
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