The Key Information on Brexit
Brexit negotiations have moved to the future trading relationship; read more about what has been agreed and what to expect.
The UK officially left the EU at the end of January 2020, and is now in a transition period, where there are no significant changes to trade and regulations. This transition period was part of the EU/UK Withdrawal Agreement, and will last until the end of 2020.
The UK Government reached a revised agreement with the EU on 17 October 2019 and this was formally approved by MPs in parliament following the UK’s general election.
The Agreement comes in three parts.
Firstly, the Withdrawal Agreement itself which covers everything from citizens’ rights, the financial settlement – estimated to be in the region of £33bn – data protection and the length of the transition period.
Secondly is the protocol on Ireland/Northern Ireland and thirdly a political declaration on the future relationship. All of these documents are available here on gov.uk.
Under the terms of the Agreement, a transition or implementation period will begin after the UK leaves the EU and would end on 31 December 2020.
The idea is that this will give the UK time to introduce a new immigration system and means that businesses should only have to plan for one set of changes in the nature of the relationship between the UK and the EU.
The implementation period will see trade continue on “current terms” – in other words the UK will not leave the Single Market or Customs Union until the end of this period. But, the UK will be able to sign and ratify its own trade deals – including the future trade agreement with the EU.
The EU explained^ PDF† that the UK will have to continue to adhere to all existing EU regulations during this period, including the “four freedoms” of movement of goods, capital, services and people, but they will not have any representation in the EU’s political institutions, including the Parliament, Council or Commission.
There is provision in the Agreement to extend this transition period, which would require the consent of both the UK and EU.
The unique status of the UK’s only land border with the European Union has throughout Brexit been one of the defining debates. The EU and the UK have been seeking to find a solution that respects both the peace process and the integrity of the EU’s Single Market.
The Agreement introduces the Protocol on Ireland/Northern Ireland. There are three key points to the protocol:
- Northern Ireland will continue to align itself to the EU’s Single Market rules for certain sectors including manufacturing and agricultural standards;
- Northern Ireland will leave the EU’s Customs Union alongside the rest of the UK and will be able to participate in future trade negotiations. However, some new customs checks will be implemented between Great Britain and Northern Ireland;
- The Northern Irish Assembly at Stormont will maintain the right to self-determination by voting every 4 years after the transition period has ended on whether to continue with the protocol.
This will mean that goods that are “at risk” of entering the EU Single Market will have EU tariffs applied when they enter Northern Ireland from Great Britain. The list of at risk products will be drawn up in the next phase of negotiations.
If the goods are not sent on to the Republic of Ireland, the UK government would be responsible for refunding these tariffs.
It also means that goods would have to be checked as they pass from Northern Irish to GB ports and vice versa, as Northern Ireland will remain part of the EU’s Single Market for goods. This crucially avoids the need for any checks at the border between Northern Ireland and the Republic.
It’s important to note that this protocol would only come into force after the transition period and only in the event that the UK fails to negotiate a future trading relationship by that time.
The UK and the EU have published a political declaration on the future relationship which states, among other things:
- The goal of agreeing a comprehensive Free Trade Agreement with no tariffs across all goods sectors and a liberalisation in the trade in services “well beyond the Parties’ World Trade Organization commitments”;
- An aim to ensure fair competition after Brexit, by maintaining common standards on areas like state aid, competition and employment rights;
- A plan to fully assess equivalence frameworks in respect to financial services by the end of June 2020, with the aim of preserving financial stability;
- A commitment to form a broad partnership in the area of security, including physical and digital security.
The big questions are whether the UK leans more towards the US or the EU in terms of regulatory alignment, and can a deal be done in a short space of time? While the former question will become clearer as negotiations progress, we think the answer to the latter is that a deal can be done, although it may be in the form of what we are calling a ‘skinny FTA’. Read more about what that arrangement may look like in our article here.
Trade agreements after Brexit
As the UK approached the official departure date in January 2020, the UK has taken steps to agree a series of continuity agreements with certain countries who already have agreements with the EU.
At date of publication, 20 agreements have been signed^ covering 48 nations; these agreements will take effect when the UK leaves the EU. In addition, the Department for International Trade is in discussions with around 20 other nations, including Canada and Mexico, to put in place similar agreements. These countries are collectively referred to as TAC countries (Trade Agreement Continuity countries).
10.7% of the UK’s total trade is covered by TAC countries. In addition to this, mutual recognition agreements have been signed with Australia, New Zealand and the US. This means that the countries recognise certain product conformity assessments that each are applying, covering products such as machinery and automotive parts.