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In the event of a so-called “soft Brexit” in which the U.K. remains a part of the EU single market, there may not be a significant change in the current trading environment.

However, this will require both parties to compromise on what, at present, are polarised positions on difficult political issues such as the size of the U.K.’s on-going contribution to the EU budget and the free movement of labour within the single market.

If there is a so-called “hard Brexit” in which the UK fails to reach agreement with the rest of the EU and withdraws or is ejected from the single market – an event which could occur in 2019 – there is very likely to be severe economic fallout in the UK and, to some extent, other EU countries.

Unlike the Brexit vote – which didn’t actually lead to any change in the terms of the trading relationship – the U.K.’s withdrawal from the single market would have immediate and very profound effects.

It would impact on investment decisions, consumer spending and confidence, and on immigration and the level of access to, and the price of, labour. The UK’s preeminent position in the EU in several large service sectors - such as finance and pharmaceuticals – would come under threat with far-reaching implications for the long-term health of the national economy.

A “hard Brexit” would also lead to immediate imposition of tariffs on goods from the EU that previously entered the country tax free. There would be very profound economic dislocation in those sectors that have progressed furthest to integrate supply chains between the EU and UK, such as car manufacturing, electrical goods and chemicals.

There would also be far-reaching effects on those sectors – such building materials and children’s toys – where technical and safety standards have been harmonised across the EU.

In these sectors, if the U.K. leaves the single market without, at minimum, mutual recognition with EU conformity assessment bodies, trade would be severely curtailed until the required agreements are put in place. Given the number and complexity of sectors involved, that would take some time.

It should be said that the wooden furniture importing sector in the UK is relatively less exposed to this form of dislocation compared to other industries. EU import tariffs are already zero on all wooden furniture with the exception of components and kitchen furniture which are subject to 2.7% tariff.

The furniture sector is also a so-called “non-harmonised sector” in EU trade law. This means goods are not subject to common EU rules and instead come under national rules. The sector is regulated through the so-called “mutual recognition principle” which states that a Member State must allow a product lawfully produced and marketed in another Member State into its own market.

This is true even if the importing Member State’s local rules impose more stringent (or different) requirements to which the product does not conform.

The importing Member State can disregard this principle only under strictly defined circumstances, such as where public health, the environment or consumer safety are at risk, and where the measures taken can be shown to be proportionate.

In the U.K., there are national requirements for fire safety in furniture which are mandatory for all products placed on the market, irrespective of whether from the EU or outside the EU. Imported furniture must be accompanied by documented proof of compliance and with the required permanent labels attached.

What this means in practice is that the U.K.’s withdrawal from the single market may not significantly alter the terms of trade for wooden furniture imported into the country – since there is already a fairly level playing field between U.K. imports from inside and outside the EU.

Nevertheless, the U.K.’s departure from the free market would mean, at minimum, restrictions on the current free movement of EU goods into the country. A customs clearance process would be imposed for goods coming into the UK from the EU, and vice versa. Each furniture product would need a customer code and be subject to scrutiny by customs at the border.

This adds a layer of trading complexity and increases the potential for delayed shipments, a critical issue in the furniture sector.

The large furniture retailers in the U.K. that already import a lot of product from outside the EU are geared up for this and may benefit from the U.K. leaving the single market.

In contrast, smaller U.K. retailers, and others that are heavily dependent on imports from the EU, might be at a competitive disadvantage. Large pan-European retailers like Kingfisher and IKEA that operate a centralised sourcing strategy and have gone a considerable way to integrate their distribution networks and harmonise sales activities across the continent would have to alter their business model in the U.K.

IKEA, which currently sources the majority of its wooden furniture from mainland Europe, is sufficiently concerned about the prospect of the U.K. leaving the single market that it recently announced its’ intention to manufacture more furniture in the U.K.

According to IKEA, this will help fend-off Brexit-led price rises and competition from outside the EU. The company has stated that it aims to double market share in the UK irrespective of the outcome of Brexit negotiations.