Since the UK voted to leave the European Union on the 23rd June 2016, four years have passed, two Prime Ministers have resigned, countless rounds of negotiations have taken place; and ‘backstop’, ‘transition period’ and ‘oven-ready’ have entered our everyday lexicon. Despite this, there is still significant uncertainty as to how our post-Brexit relationship with the EU might look.
On 31 January 2020 the UK formally left the EU under the terms of the Withdrawal Agreement. We are currently in the transition period, an 11 month phase which is due to expire on 31 December 2020. During the transition period the UK continues to adhere to EU rules and pays its share of the EU budget. The purpose of this period is to allow time for both sides to iron out the remaining issues ahead of the UK’s effective exit from the EU in December.
Whilst the Withdrawal Agreement covered the mechanics of the transition period, certain issues relating to the Irish Border and the UK’s financial settlement with the EU, the vast majority of the UK’s relationship with the EU will be governed by any new agreement that is made prior to 31 December 2020. The key areas of negotiation relate to trade, fishing access, medical regulation and security co-operation.
Talks to reach an agreement on an ongoing relationship were due to conclude in mid-October 2020, yet no agreement has been reached. Currently the UK and EU are in the midst of a final-final-final round of negotiations. The most contentious outstanding issues include competition rules, state aid for businesses and fishing rights. If no agreement is reached, then the UK will leave the EU on a no-deal basis and revert to WTO trading rules. This will include the imposition of tariffs on certain goods and services being imported and exported from the UK.
On top of this, the UK continues to negotiate trade deals with other countries to allow it to continue to trade with them on the same terms as when the UK was part of the EU. The UK has so far agreed around 24 of these deals, representing around 10% of total UK trade. These mostly comprise a subset of the existing deals the EU has with other countries that have been 'rolled over' to allow the UK to trade with these countries (e.g. Iceland, Norway and Switzerland) on the same terms as it has done as part of the EU. The UK has also agreed important free trade agreements with Japan and Canada, the first new trade deals that does not represent the continuation of an existing EU agreement. Notably, no agreement has yet been reached with the USA or Australia.
In our Brexit themed series of articles we are collating our collective expertise from across Alliotts to help you navigate the coming months, and years. We are covering the key areas of international trade, tax and VAT, employment and HR.
We will endeavour to release further information and updates as the situation evolves, so do please keep checking our Brexit blog.