We have gathered together for this special edition of Brexit Business Brief 20 quick points you should know as the UK enters the transition phase to negotiate its future relationship and end its 46-year marriage with the EU. The next edition will look at the EU and UK opening positions ahead of the trade negotiations.
1. What changes on 31 January?
The United Kingdom leaves the European Union at 11.00 p.m. London time on Friday 31 January 2020. It ceases to be a Member State and becomes, in EU jargon, a ‘third country’.
2. What stays the same?
From the moment of exit until 31 December 2020 – that is 11 months – the UK will be in the ‘transition period’. The UK government calls the transition period the ‘implementation period’.
3. Why is it referred to as a ‘status quo transition’?
During the transition period, the UK remains in the Single Market and in the Customs Union. The four freedoms of the Single Market – goods, services, people and capital – continue to apply in and to the UK.
4. Are we still bound by EU law?
Yes. During the transition period, EU law continues to be directly applicable in the UK and to have direct effect.
5. Does this affect trade with countries outside the EU?
During the transition period, the UK remains bound by agreements (including trade agreements) between the EU and third countries.
6. Does anything change during the transition period?
During the transition period, the UK has no rights of representation or participation in any EU body, forum, meeting or institution (with some very limited exceptions).
7. Can the transition period be extended?
Yes. Under the terms of the Withdrawal Agreement between the UK and the EU, it can be extended until either the end of 2021 or 2022, by one decision taken jointly by the EU and the UK before 1 July 2020.
8. But the UK government says it will not extend:
The UK government committed in its election manifesto to not extending the transition period. Section 15 of the European Union (Withdrawal) Act 2018 prohibits the government from agreeing to an extension of the transition period. That could of course be reversed if the government changes its stance.
9. What do the EU and the UK do during the transition period?
They negotiate the ‘future relationship’ which should take effect at the end of the transition period.
10. What will those ‘future relationship’ negotiations cover?
Trade in goods and services. Movement of data. Transport. Energy. Fisheries. Defence, security and intelligence. ‘Level playing commitments’ on state aid, tax, and social and environmental protection will be sought by the EU, so that, in its view, the UK cannot gain competitive advantage through deregulation and changing standards in those areas. A governance framework for these areas.
11. That is a lot to cover in 11 months:
Yes. The EU doesn’t think it can be done. It will seek to prioritise trade in goods, fisheries, security, and level playing commitments.
12. Why is there so much to negotiate?
We are unpicking 46 years of UK membership and putting back together some form of working relationship between one of the world’s biggest trading blocs and one of the world’s biggest economies.
13. What’s the UK’s view?
It is more bullish that a comprehensive future relationship can be settled in that time.
14. When do the negotiations start?
March. The EU says it needs to go through some internal processes before it is ready.
15. When will the negotiations end?
To have an agreement that can be ratified before the end of transition period in December 2020, an agreement probably needs to reached by the autumn.
16. So there could be a detailed agreement in some areas by the end of 2020?
17. And an outline agreement with continued talks on other issues?
Yes. Given the range and complexity of the negotiations, a ‘layered’ approach where some issues are addressed in more depth first and others in outline seems likely. A millefeuille deal, perhaps.
18. But there could be a ‘no trade deal’ exit at the end of 2020?
There could be, but the history of ‘no deal’ speculation over the past year is that when push comes to shove, it does not happen.
20. Osborne Clarke’s Insights are also useful.
Compliments of Osborne Clarke, a Member of the EACCNY