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Brexit update
The transition period
The UK left the European Union on 31 January 2020 and the Brexit process has now moved into an 11-month transition phase. This period will be marked by the UK’s absence from all the EU's political institutions and agencies, so there are no longer British MEPs sitting in the European Parliament. However, there will be no changes to trading arrangements with the UK staying in the customs union and the single market, as well as following EU rules, during the transition period.
Here, we take a look at what will change during the transition period, what will stay the same and what to keep an eye on this year.
UK-EU trade
The UK and EU will continue to trade together during the transition period without any extra charges or checks being introduced, because the UK remains inside the EU’s trading structures. During this time, the UK will continue to be subject to EU directives, and it must continue to incorporate new EU rules into UK legislation. This means, as today, goods and services may continue to flow without tariffs, checks or regulatory restrictions.
The UK is, in effect, a non-voting member of the EU until the end of this year.
Work and Travel
For those working and travelling within the EU things will continue as normal this year.
Freedom of movement will continue to apply during the transition, so UK nationals will still be able to live and work in the EU as they currently do. The same applies for EU nationals who want to live and work in the UK.
Flights, boats and trains will operate as usual and driving licenses will remain valid. Also, UK nationals will still join the faster EU arrivals queues at passport control during the transition period.
Budget contributions
The UK will continue to pay into the EU budget during the transition. This means existing schemes, paid for by EU grants, will continue to be funded.
New relationship
Although it will be very much business as usual this year the question of what happens at the start of 2021 will hang over the next few months.
The UK is due to leave the EU’s trading structures - the EU VAT regime, customs union and single market - at 11pm on 31 December 2020. The trade talks that will take place this year will determine how much free access UK businesses will continue to enjoy in the EU after that date. This will be played off against the limited amount of alignment and rule taking the UK will be willing to accept.
Negotiations start in February and the time available to strike a deal is relatively short. Trade experts say there is insufficient time to negotiate a comprehensive free trade agreement, instead we will probably see a deal involving trade-offs between zero-tariff access and regulatory alignment.
Future trade deals
The UK is now free to start opening talks with countries around the globe with the aim of opening up new export markets for goods and services via free trade deals. Until now EU membership has prevented the UK opening trade negotiations with countries like the US, China and Australia.
Brexit supporters argue that having the freedom to set its own trade policy will boost the UK's economy. The UK and US have both pledged to prioritise a free trade deal. However, negotiations would have to run in parallel with the EU ones, which may complicate matters, as could the US Presidential elections and the need for Congress to sign off on any agreement.
The end of the beginning
The UK’s formal departure from the EU marks the end of the beginning of Brexit and the start of a new phase. Businesses that trade with Europe will be able to carry on as usual this year but will be carefully watching developments in negotiations to see what changes they may bring for 2021.