The final withdrawal agreement and the draft political declaration on the future relationship were agreed by the leaders of all 28 EU countries at an extraordinary summit of the European Council, in November.
This represents a key milestone in the Brexit process. However, the UK Parliament must now vote to accept the deal before it is ratified in both the UK and the EU.
As we well know by now, ‘nothing is agreed until everything is agreed’, and uncertainty in UK domestic politics has the potential to change the direction of Brexit.
Key points of the withdrawal agreement
The lion share of the withdrawal agreement was largely agreed earlier this year.
Of key importance to businesses across sectors is the transition period, which will begin on 29 March 2019 and will last until 31 December 2020. The Agreement also provides for the extension of this, but only until the end of 2022 at the most.
Both the UK and EU must agree to any extension and the decision must be taken before 1 July 2020.
During the transition, the UK will have left the EU but will remain within the Single Market and Customs Union, meaning that the free flow of goods, capital, services and people can continue under EU law.
The UK will have no presence in the European Parliament, the European Commission or the European Court of Justice (ECJ). It will therefore have no formal say in making or amending EU rules and regulations but will still have to follow these and will remain under ECJ jurisdiction for this period.
A transition period has been a key ask of businesses throughout the Brexit process, giving more time to prepare for the new regime and avoiding the much feared ‘cliff edge’ scenario. However, it will only be legally certain once the withdrawal agreement is ratified. If the UK Parliament vote down the deal in December, there is still a risk that the UK could leave the EU with no deal and with no transition.
The other key point of the withdrawal agreement is the Northern Ireland backstop.
If no long-term trade deal has been agreed by the end of the transition period that avoids a hard border between Northern Ireland and the Republic of Ireland, then a backstop consisting of a “single customs territory between the EU and the UK” will be triggered, or in other words, a temporary customs union.
Northern Ireland will be in a deeper customs relationship with the EU than the rest of the UK and will be more closely aligned with the rules and regulations of the EU Single Market.
As long as the backstop is in operation, the UK will be subject to “level playing field conditions” to ensure it cannot gain a competitive advantage while remaining in the same customs territory, and – crucially for Conservative MPs – the UK cannot leave the backstop independently, rather this must be decided with the EU. This means that while the backstop applies, the UK cannot implement any trade deals with other countries around the world that involve removing tariffs on goods.
More broadly, the withdrawal agreement sets out calculations for the financial settlement, UK and EU citizens’ rights, a dispute resolution mechanism for the Agreement, and protocols on Gibraltar.
The political declaration on the future relationship
The political declaration covers a wide range of economic and security issues and intends to establish the “parameters of an ambitious, broad, deep and flexible partnership across trade and economic cooperation, law enforcement and criminal justice, foreign policy, security and defence and wider areas of cooperation”.
The final document is a statement of intent rather than a legally binding treaty. Formal negotiations on everything it contains can only begin after exit day on 29 March 2019. However, the declaration does contain plenty of aspirations involving shared interests, close partnerships and ambitious cooperation.
It also states that the UK and EU will approach the relationship with “high ambition with regard to its scope and depth” and that they recognise that this “might evolve over time”.
We have broken down the key points of interest across our 12 headline sectors below.