Brexit - Our New Relationship with the European Union
If 31 January 2020 marked the legal end of the UK's membership of the European Union, 31 December 2020 marks the practical end.
The Brexit Transition Period preserved most aspects of the UK's membership of the EU whilst the arrangements for the future relationship were negotiated - but from 23:00 on 31 December, almost five years after the 2016 Referendum, the new ways of engaging and doing business with our EU neighbours have kicked in.
We have been considering what this deal means, and how it will affect the sectors which our clients operate in. At over 1,200 pages (not including the political declarations and side agreements that sit alongside the main deal) there is a huge amount of detail in the agreement - certainly more than can be sensibly summarised here. However, to mark the start of our new relationship with the European Union, we have highlighted below four key areas.
Trade in Goods
The new relationship will affect organisations in different sectors in different ways. For many businesses, whose customers and supply chain are located in Great Britain, business will carry on largely as before.
However, for most businesses with EU (and Northern Irish) customers and supply chains, there will be additional processes that need to be followed in the import and export of goods. In some cases those changes will be phased in, but to varying degrees there will be requirements for customs declarations, compliance with 'rules of origin', and the need in many cases for products placed on both the EU and UK markets to undergo two sets of conformity assessments.
Trade in Services
For services businesses, the UK and EU have agreed some commitments on market access. However, those commitments are subject to a number of exemptions and limitations - and as expected, the agreement makes no provision for access to financial services markets beyond an intention to establish a framework in the future for regulatory cooperation.
Changes to the mutual recognition of many professional qualifications between the EU and the UK (for example, for architects and engineers), and the limitations on free movement to work in the EU, will also affect some businesses trading services between the EU and the UK.
Whether trading in goods or services, businesses will need to identify any sector-specific regulations which apply to them. The agri-food, automotive and creative services sectors, among many others, will need to familiarise themselves with the changed regulatory regimes which apply to those businesses.
State Aid
The rules on State aid - one of the key sticking points in the negotiations with the EU - are in something of a state of flux. The EU State aid regime will cease to apply (save, in some respects, where it is relevant to trade between Northern Ireland and the EU) and the Government has committed to consulting on a new subsidy control regime.
However, for now, public bodies (and potential recipients of State aid) will need to refer to the WTO rules on subsidies, overlaid with principles set out in the UK's agreement with the EU, for the detail on how State aid rules are to work. You can see more detail on State aid and procurement changes in an article by our Public Sector team.
Data Transfers
Of particular concern to many businesses in the negotiation of the future relationship was whether the EU would grant the UK an 'adequacy decision', allowing transfers of personal data from the EU to the UK without businesses needing to take additional actions.
For now, a further transition period for data flows has been agreed until at least 30 April 2021 (extendable to 30 June). So for the time being, there will be no change in data transfers from the EU to the UK - however, businesses will need to keep this under review as the EU debates whether to grant the UK an adequacy decision. You can see more detail on data protection changes in an article by our Data Protection team.
Looking Forward
Since before the Referendum, and throughout the Transition Period, the debate about the opportunities and challenges of our departure from the EU has been a divisive one. From 1 January 2021, we hope to see the more polarising elements of that debate replaced with reflection on how we can all best seize those opportunities, and meet those challenges.
Inevitably, there will be a period of adjustment for businesses to the new relationship with the EU, and the new basis for trading with businesses in the EU. We will be very happy to work with you, to help you to navigate the new rules and to adjust to that new relationship.
