As the clock ticks down to midnight on 31 January 2020 in Brussels and other parts of the EU, it is still 11 pm in London and the UK is an hour behind. As the Agreement on the Withdrawal of the United Kingdom of Great Britain and Northern Ireland from the European Union and the European Atomic Energy Community (the Withdrawal Agreement) takes effect, what are the implications for business, and how will the UK get ahead?
What happens next?
A key term of the Withdrawal Agreement is that it provides for a “transition period” effective from 31 January 2020 until 31 December 2020 (the Transition Period). This is intended to give the EU and the UK time to finalise the terms of the divorce.
However, whilst the UK will no longer participate in EU institutions and agencies, it appears that, in practice, very little else will change. During the Transition Period:
What will happen after the Transition Period?
From a legal perspective, the Withdrawal Agreement provides relatively clear goalposts as to the amendments that will be made to the UK legal system. For example:
However, the bulk of the commercial and practical implications of Brexit remain unknown. A trade deal between the UK and the EU will need to be brokered and the question of the Northern Irish border will need to be resolved. With regard to contractual continuity, whilst many EU states have announced their intention to introduce measures to maintain the status quo, this is only possible where the individual EU states take active steps to amend their relevant legislation.
In the meantime most UK companies have already made their Brexit plans and there has reportedly been a late surge of EU and other international companies establishing in the UK to take advantage of what many commentators believe will be a more liberalised regulatory environment with trade links across the world. However, that is exactly what the EU fears, and faced with slowing economic growth and internal political divisions it is likely that any trade deal with the UK will impose limits on how much divergence will be permitted consistent with favourable trade terms.
And a trade deal may not happen soon. Crucially, Article 132 of the Withdrawal Agreement allows for the Transition Period to be extended by up to two years by mutual agreement. So we can say with certainty that Brexit is happening and that it will have profound effects on every business, but we still cannot say how and when these effects will be felt.
If you would like to discuss the implications for your business, then please get in touch with your normal contact at Pillsbury or either of the authors.