A year in transition: How businesses can use 2020 to prepare for Brexit

Posted Thursday 30th January 2020

Is Brexit done yet?

The UK is leaving the EU on 31 January 2020. The Withdrawal Agreement was given Royal Assent on 23 January 2020, thereby marking its passage into law and avoiding (to some extent) a no-deal Brexit.

The Withdrawal Bill sets out a number of transitional arrangements which will apply until 31 December 2020.

The Transition Period

During the Transition Period – between 31 January 2020 and 31 December 2020 – the EU and UK will seek to agree arrangements regarding issues such as law enforcement, aviation, fishing rights, energy supplies and regulation of medicines. However, the key negotiations will be on a new trade deal which will determine how freely UK businesses will be able to continue supplying goods and services to the EU, and vice versa.

In the meantime, EU law (including the current trade rules, regulations, duties and tariffs) will continue to apply in UK. In short, the current free trade arrangement will remain in place until 31 December 2020 or, if earlier, until a new deal is put in place.

What if no trade deal is agreed?

Many commentators are sceptical as to whether the Transition Period is long enough to enable the UK and EU to conclude a trade deal. The UK government has ruled out extending the Transition Period beyond 2020, although it may prove necessary to do so.

If no trade deal is agreed with the EU by 31 December 2020, and the Transition Period is not extended, the EU and UK will treat one another as ‘third countries’ for the purpose of trade. Third countries are those with whom the EU does not have a free trade or equivalent agreement and with whom trade is governed by World Trade Organisation (WTO) rules.

In order to prepare for the possibility of no trade deal being agreed, businesses might consider checking which tariffs currently apply to imports/exports of their goods to third countries in order to get a clearer picture of what the position could be after 31 December.

There is a useful tool on the government website that helps to identify which commodity code a product falls within, and the tariffs apply to that product. However, trade tariffs are subject to change and their adjustment is one tool the government can use as part of its future trade policy, particularly in the event that no trade deal is agreed.

Further Brexit-specific guidance is available on the government website including pages dedicated to both imports and exports.

2021 and beyond

The nature of the UK-EU trading relationship from 1 January 2021 depends on the outcome of negotiations during the Transition Period. If a trade deal is agreed, the impact may range from a maintenance of the status quo – in which businesses have to change very little about how they currently trade with the EU – to a more significant departure, requiring businesses to think strategically about how they operate.

Businesses must continue to monitor the ongoing trade negotiations, consult any updated government guidance, and consider ways in which they can become or remain adaptable in response to future change.

This article is for reference purposes only. It does not constitute legal advice and should not be relied upon as such. Specific legal advice about your specific circumstances should always be sought separately before taking or deciding not to take any action.

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