The state of the economy heading into 2021 and the prospects for growth over the rest of the year.
Documents to download
End of Brexit transition: key changes and preparations (298 KB, PDF)
Deal or no deal: some things will change
The Brexit transition period is scheduled to end on 31 December 2020. The UK and EU are still in negotiations with a view to agreeing a treaty (or set of treaties) that would be ready to come in force when the transition period ends.
After a series of deadlines for reaching a deal were missed with significant differences on key negotiating issues remaining, Boris Johnson said on 10 December that there was a “strong possibility” that the UK and EU would not reach an agreement. He said that it was time for the public and businesses to prepare for this scenario on 1 January 2021. Without an agreement in place, UK-EU trade will revert to World Trade Organization (WTO) rules and current co-operation arrangements in several areas will cease.
The Prime Minister and President of the European Commission nevertheless agreed on 13 December to continue talks and “go the extra mile” to see whether an agreement could be reached. But irrespective of whether an agreement is reached, the end of the transition period will bring several changes impacting trade, travel and other arrangements between the UK and EU.
This briefing provides an overview of key changes and preparations for the end of the transition. For further details on changes and the possible impact of having a deal or no deal in specific sectors and areas of co-operation, see the separate Commons Library briefings on the end of transition collected here.
The transition period
The transition period began when the UK left the EU on 31 January 2020. During this period, nearly all EU rules continue to apply to the UK. The UK remains part of the EU single market and customs union.
Under the Withdrawal Agreement (WA) the UK and EU could have agreed an extension to this period. But a decision on this had to be made before 1 July 2020. The idea of a new treaty providing for a short “standstill period”, which would enable some or all of the current arrangements to continue for a time limited period, has been revived by some commentators. This is viewed as a possible way of overcoming the difficulties presented by the very short period left before the end of December for both sides to conclude and ratify the deal. But such an arrangement might be politically difficult to agree for both sides, and legally difficult for the EU. There is no indication from the UK or EU that this has being seriously considered.
The European Parliament’s deadline for organising a consent vote on a UK-EU deal passed on 20 December. On 21 December there were renewed calls for an extension of the transition, but the UK Government rejected the idea.
Leaving the single market and the customs union
The UK is due to leave the single market and customs union at 11pm GMT on 31 December 2020.This would be the case both under the UK Government’s stated objective of a free trade agreement with the EU, or if no agreement is reached.
The European Commission emphasises, “there will be broad and far-reaching consequences for public administrations, businesses and citizens as of 1 January 2021, regardless of the outcome of negotiations.”
In presenting the Commission proposed directives for the UK-EU negotiations in February 2020, the chief EU negotiator, Michel Barnier, explained that even with a “best-in-class” free trade agreement, the UK and the EU would now have two separate markets.
Mr Barnier highlighted examples of things that would change, including the need for customs checks and rules of origin (to determine where a product or its components were made). In addition, UK goods entering the EU would be subject to regulatory checks to ensure they comply with EU product standards. UK financial services suppliers would also no longer have the passporting rights they previously had.
Cabinet Office Minister Michael Gove told the House of Commons on 13 July that leaving the single market and customs union “will herald changes, and significant opportunities, for which we all need to prepare—Government, business and individual citizens.”
The end of free movement
Free movement for UK citizens travelling to, living and working in the EU will also end on 31 December (as it will for EU citizens coming to the UK).
UK citizens will not need visas to enter the EU for short trips. The EU has said that UK citizens coming to the Schengen area (covering most EU states) for a short stay (90 days in any 180 day period) will be allowed visa-free travel. But for longer stays, Member States’ own rules are likely to apply. The UK Government has said that EU citizens visiting the UK will be able to do so without visas for six-month periods.
Government guidance warns UK citizens they will need six months on their passports when travelling to the EU, and may no longer be able to use the border control lanes for EU citizens. They may need additional documentation for other reasons: the EHIC health card providing cover for visits to the EU may no longer be valid and an international driving permit may be needed for driving in the EU.
The existing pet passports scheme will also no longer be valid. Pet owners will need to get the appropriate vaccinations and certificate for them in advance of travel.
Over the next few years, both the UK and EU are also planning to introduce an electronic authorisation system for visitors, similar to the US ESTA system where visitors pay a one off fee for a travel authorisation which lasts for a set period of time.
Replacing international agreements
The EU’s international agreements will cease to apply to the UK at the end of the transition period. The Government has negotiated new or replacement trade agreements covering 58 countries that were previously covered by EU trade agreements. Discussions are continuing with nine countries over possible replacement agreements.
The Government also previously published a list of non-trade international agreements it was seeking to negotiate in order to replace EU agreements. However, it has not provided a recent update on progress on these agreements.
UK preparations for end of transition
In June, the Government announced that UK import controls would be introduced in three phases: in January, April and July 2021. The Government said this “flexible and pragmatic approach” would give industry more time to prepare, recognising that the coronavirus had made this more difficult.
In his July statement on the end of the transition period Michael Gove highlighted the need to prepare, irrespective of whether or not there was a new UK-EU deal. Mr Gove announced a new border operating model (updated in October) and additional funds for border infrastructure, and outlined the different types of documentation traders would need. He also announced a public information campaign to help businesses and individuals to prepare.
There are concerns about how ready the UK border will be for the changes which will occur in January. A report by the National Audit Office in November described preparations to manage the border at the end of the transition period as “very challenging.”
EU preparations for end of transition
The European Commission published a communication on “readiness at the end of the transition period” in July 2020 which highlighted “changes happening in any scenario.” Sectors covered included trade in goods and services, financial services, transport, recognition of professional qualifications, data protection, intellectual property, and EU international agreements (which would no longer apply to the UK). The Commission has published 89 “readiness notices” across a wide range of policy sectors and technical issues. These advise administrations, businesses and citizens on what they have to do to prepare for the changes at the end of the year.
EU ‘no deal’ contingency plans
On 10 December, the Commission published its contingency measures for if there is no new EU-UK agreement in place at the end of the transition period pass. These covered:
- Basic air connectivity: to ensure the provision of certain air services between the UK and the EU for 6 months, provided the UK ensures the same.
- Aviation safety: to ensure various safety certificates for products can continue to be used in EU aircraft without disruption.
- Basic road connectivity: to allow for continuing road freight, and road passenger transport for 6 months, provided the UK assures the same to EU hauliers. This would be subject to the application by the UK of fair competition, social and technical rules equivalent to those of the EU.
- Fisheries: providing a legal framework to agree reciprocal UK-EU fisheries access for 2021.
The Commission emphasised that contingency measures could not provide continuity or replicate the benefits of EU membership or of the transition period. Nor can they provide for a situation that is as beneficial as that which the partnership agreement offered by the EU to the UK would provide for.
The Cabinet Office Minister Michael Gove has said the UK would look closely at the EU no deal contingency plans, and had a positive view of the aviation and road transport measures. But the fisheries measure was “of greater contention“.
Documents to download
End of Brexit transition: key changes and preparations (298 KB, PDF)
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