Brexit has happened.  The United Kingdom is no longer part of the European Union or the European Economic Area.  But in the short term, nothing really changes.  The UK has entered a transition period during which it remains bound by EU rules and trade policy.

Until the end of the transition period, which is set out in the UK Withdrawal Agreement, the rights and obligations of EU law continue to apply in the UK largely as they did before, although the UK will be outside the EU’s decision making institutions.  The transition period is due to end on 31 December 2020, unless both sides agree to an extension.  So far, the UK Government has refused to consider a possible extension and the UK Parliament has even legislated to prohibit the Government from agreeing one. Parliament can of course undo the prohibition but, at this point, an extension looks unlikely. Under the Withdrawal Agreement any extension must be agreed with the EU by June 2020.

Therefore, whilst the UK and EU have avoided the hardest kind of Brexit, there remains considerable uncertainty as to the position of the UK and the arrangements that will apply to its relationships with the EU, and the rest of the world, following the end of the transition period.

The basis for negotiating the future trading relationship between the UK and the EU will be the non-binding Political Declaration previously endorsed by both parties. It envisages an ambitious free trade agreement for goods but a more significant gap relative to the EU/EEA single market for services, especially financial services. However, it remains to be seen whether its provisions and compromises can be implemented within 11 months, and the ‘cliff-edge’ risk of a hard Brexit and a fall-back to World Trade Organisation rules remains a possibility. In any event, the legal, regulatory and operational frameworks for UK-EU trade are set to significantly change from 2021.

In the attached presentation, we provide an overview of the main provisions of the Withdrawal Agreement and the Political Declaration, what businesses should focus on during the transition period, and an overview of next steps, including the Government’s post-Brexit legislative programme.