Brexit Will Happen Tonight. What Next?

At midnight tonight Luxembourg time, the United Kingdom will leave the European Union. For business in the EU and the UK, nothing will change during 2020. However, everything could change from 1 January 2021 as there is still considerable uncertainty on what the future relationship between the EU and the UK will look like. This newsflash looks at what Brexit means for business and the steps ahead.

Transition Period until 31 December 2020

During 2020, nothing will really change for companies, services, goods and individuals. The transition period provided for in the Withdrawal Agreement between the UK and the EU stipulates that EU law will continue to be applicable to and in the UK until 31 December 2020. As a consequence, the free movement of goods, services, capital and people within the EU will continue to include the UK for eleven more months at least. Companies and economic operators ("undertakings") in the EU-27 may therefore pursue their economic activities in the UK as before. Similarly, UK undertakings will continue during this time to benefit from the EU passport and trade freely in the EU.

After 2020, however, there is still uncertainty surrounding the nature of the relationship between the EU and UK and therefore what access undertakings in the EU will have in the UK and vice versa.

Although the transition period could be extended by a year or two by joint agreement between the EU and UK before 1 July 2020, it is important to note that the UK Government has stated on a number of occasions that it does not want the transition period to last longer than is currently foreseen. This means that a treaty or agreement governing arrangements between the EU and the UK will need to be negotiated by and effective on 1 January 2021 in order to avoid the effects of a so-called Hard Brexit after the end of the transition period.

Free Trade Agreement applicable from 1 January 2021?

The EU and UK will spend the coming months negotiating an agreement to govern their relationship after the end of the transition period.

Using the Political Declaration agreed between the EU and the UK in October 2019 as its starting point, this is likely to be a single far-reaching agreement covering not just trade but also such diverse issues as political and judicial cooperation, security, mobility of persons and fishing, among others. It is not anticipated that the UK will join the European Economic Area nor be part of a common customs union with the EU meaning...