31 Jan 2020

The EU Parliament vote on 29 January completed the ratification process, meaning that after more than three years of uncertainty, Brexit takes effect at 11.00pm on 31 January and the UK ceases to be a member of the European Union. Other than the issue of commemorative 50p coins, though, little will change until the end of the "implementation period" – 11.00pm on 31 December 2020. That eleven month transition period must be used wisely, allowing businesses to prepare for full legal separation of the UK from the EU, and to explore the opportunities available to a "global Britain". However, businesses will need to remain vigilant throughout 2020 as key elements of the UK's future relationship with the EU, and the shape and direction of the UK's independent trade policy will only become clear as negotiations proceed.

Legal position at the end of the implementation period

During the implementation period the legal and regulatory relationship between the UK and EU remains essentially the same. Until 31 December 2020 there will be no new or additional customs checks or border clearance procedures for goods, and "passporting" rights for financial and other services remain available. However, that element of continuity stems from the Withdrawal Agreement (WA) and is strictly temporary. Whether, and to what extent, new procedures, tariffs and regulatory checks become necessary once the implementation period has ended will depend on the course and outcome of negotiations between the UK and EU, due to begin on 3 March. 

Although the Conservative Party secured a substantial Parliamentary majority through its slogan of "Get Brexit Done", 31 January merely clears the way for negotiation of the future relationship, and for the development of an independent UK trade policy. Many of the details, and their practical implications, are unlikely to be clear or confirmed until the end of 2020. The WA leaves open the possibility of either a "no deal" Brexit, or of a deal only on parts of the future relationship. On expiry of the implementation period, EU laws will continue to have effect in the UK, but as though originally made as UK law, and with the possibility of subsequent divergence.

Brexit preparations

The implementation period provides business with time to review and, if necessary, alter their existing contractual and other practical arrangements. For example:

  • Analyse and map supply chains for essential materials or supplies, to evaluate and address the risk of any delays once new customs and border clearance procedures take effect on 1 January 2021;
  • Allocate responsibility and risks in relation to customs, export or import licensing, border clearance, import VAT and other taxes relating to cross-border supplies;
  • Develop and implement procedures to meet the requirements of the Northern Ireland Protocol, governing goods, components and materials crossing from Great Britain to Northern Ireland. In particular, establishing what measures must be taken to prove that goods are not intended to move from Northern Ireland into the EU market via the Republic of Ireland;
  • Check whether employees or contractors have "settled" or "pre-settled" status in order to work, reside or rent accommodation within the UK once freedom of movement has come to an end.

For businesses that are solely or principally concerned with the provision of services rather than goods, it will be necessary to monitor the progress of UK-EU negotiations on the "future relationship". Those negotiations are scheduled to begin on 3 March 2020, and as with many previous UK-EU negotiations may well go down to the wire in December 2020.

WAB and future Parliamentary Scrutiny

Reflecting the government's significant majority after the 12 December 2019 general election, the UK's Brexit legislation substantially reduces the opportunities for further Parliamentary debate on the conduct or outcome of UK-EU negotiations. Provisions allowing the House of Commons to set negotiating priorities or requiring a vote to approve the terms of any deal on the future relationship were rejected. The UK's Brexit legislation also specifically disapplies Constitutional Reform and Governance Act 2010, Part 2 (CRAG), meaning that the government is not obliged to lay a copy of the final treaty text before Parliament, and then wait 21 sitting days to allow Parliament to scrutinise the treaty. Under the CRAG procedure, a House of Commons vote against ratification would prevent the government from proceeding with its deal. Exclusion of CRAG, and other potential points of Parliamentary challenge, means that the conduct and conclusion of negotiations now become a matter for the executive. It also means that the final terms of any agreement on the future EU-UK relationship might remain under negotiation until the very last minute.