Illustration by Christoph Niemann

A few days after the United Kingdom voted to leave the European Union, Nigel Farage, the head of the U.K. Independence Party, made a curious speech to the European Parliament. Farage has spent nearly two decades railing against the E.U., and his speech went viral, thanks to the unbridled scorn he showed toward his listeners. Less commented on was the end of his address, which struck a very different note. He begged the E.U. to make a tariff-free trade deal with the U.K., and promised that the British “will be your best friends in the world.” Farage was articulating the fundamental dilemma of Brexit. In 2015, forty-four per cent of the U.K.’s exports went to E.U. countries, and fifty-three per cent of its imports came from them. Although London is famous as a global financial center, it enjoys that status largely because it’s a gateway to the Continent. So, while the referendum pushes the U.K. away from the E.U., economic needs require it to stay close.

Brexiteers insist that leaving will let the U.K. discard stuff that many voters dislike—free movement of labor, high budgetary dues, nitpicky regulations—without jeopardizing the country’s access to Europe’s tariff-free single market. Matthew Elliott, the Leave campaign’s chief executive, promised that the U.K. would “be able to trade with the single market on free-trade terms, without paying into the system or accepting freedom of movement.” And Boris Johnson, in a post-Brexit article, insisted that “there will continue to be free trade, and access to the single market.”

Tell that to the rest of Europe. From the start of the push for Brexit, European leaders warned that the U.K. ran a “very serious risk” of being shut out of the single market. Last week, at a meeting of the E.U.’s heads of state, that message was reiterated: the U.K. cannot leave the E.U. and have “à la carte” access to it. Even if some of this is posturing, markets are anticipating a much harder landing than what Leave promised. “If the British believe that they’ll be able to negotiate a special opt-out deal, they’re delusional,” Nicolas Véron, a fellow at the Peterson Institute and the European think tank Bruegel, told me.

There are several models for how a future outside the E.U. might look. Like Norway, a non-E.U. member, the U.K. could join the European Economic Area, retaining access to the single market while reducing its budgetary contributions. But that would mean accepting free movement of labor, the very thing a huge number of Leave voters voted against. The same would be true if it tried to emulate Switzerland, which has more independence of the E.U. than Norway but also more limited access to the single market. The most likely outcome is that the U.K. will end up with a trade agreement like one that Canada recently negotiated: it pays virtually no tariffs and is able to sell goods throughout the single market. It doesn’t make any contribution to the E.U., and there’s no free movement of labor. The U.K. could keep selling raincoats to the E.U., while the Germans would keep selling B.M.W.s to the British.

That might sound like a great deal, but for the U.K. there’d be a big catch: the arrangement wouldn’t cover banking and other financial services. Right now, firms established in the U.K. can operate anywhere in the E.U., under a system known as “passporting.” If the U.K. loses passporting rights, banks will likely move much of their business out of London, probably to Paris, Frankfurt, or Amsterdam. As Véron puts it, “There’s a very real possibility that the City will be significantly hollowed out.” This would hit the British economy very hard, since banking is one of its biggest industries. Although being less reliant on banking might be good for the U.K. in principle, the adjustment would be brutal.

The Brexiteers are confident that none of this will happen, on the assumption that Europe is bound to see that the status quo offers the best deal for everyone. The E.U. sells the U.K. hundreds of billions of dollars’ worth of goods and services every year, so both sides have an incentive to keep things as they are. But this is naïve. For one thing, many European countries would be happy to see their own banking sectors flourish at the U.K.’s expense. The French President, François Hollande, has already said that financial clearinghouses would have to move out of London if they wanted to continue to clear European trades, a loss that he said would “serve as a lesson” to those who “seek the end of Europe.”

As Hollande’s comments suggest, the negotiations over a new trade deal won’t be about economics alone. They’ll also be about politics. European leaders, in deciding how they should treat the U.K., will be thinking, in part, about Brexit’s effect on the stability of the E.U. itself, which they very much want to preserve. Studies show that international institutions work best, and are most effective, when members feel that leaving has a high cost. So, even if driving a hard bargain with the U.K. does some damage to the E.U.’s economy, that may be a price worth paying, in order to show Euroskeptics everywhere that leaving has consequences. “You’re willing to do things for family members simply because they’re family,” Véron told me. “But when you’re no longer in the family you’re out.” In choosing Brexit, British voters decided that ideological considerations trumped economic ones. They can hardly complain if Europe makes the same choice. ♦