Brexit: survival guide

Article published today in

Many of our clients are restless about what will happen to them after today, January 31, 2020, when the United Kingdom leaves the European Union. We publish here an excerpt from the excellent article appeared today in the prestigious Spanish economic newspaper Expansión.

London embodies the Schrödinger paradox thanks to a Withdrawal Agreement initialled with the European Union that includes a transition period until December 2020 (at least). The countdown has begun, and eleven months is the courtesy that Brussels and the United Kingdom extended to each other in negotiating their future relationship. A highly optimistic timeframe considering that it has taken two years and nine months of tumultuous negotiations (with two extensions through) just to agree on an orderly exit (which would be the door frame).

More importantly, what kind of link will unite the European Union and the United Kingdom from 2021 is still on standby (will there be a free trade agreement? And freedom of movement between people? With a financial passport?) A new round of negotiations is starting, but with less time and more issues on the table. The need to reach an agreement before June on access to finance and fishing rights (see pp. 22-23) does not make it easy either. Everything points to the fact that, once again, the talks will drag on beyond the initial deadline. Until then, this is the new game board:

February 1st: Disengagement or limbo? Tomorrow, 1 February, the European Union will lose one of its members for the first time in its history. But for all practical purposes this disconnection will be little noticed, at least this year

The greatest achievement of an orderly Brexit is that it brings with it a transition period starting tomorrow and lasting at least until December 2020. The Brexit will be seen in the UK losing its voice and vote in the European institutions, to which it will no longer belong. It was on Wednesday, in fact, that British MEPs said goodbye to the European Parliament by singing the traditional Scottish farewell song Auld Lang Syne (For Old Times’ Sake).

For citizens, consumers, businesses, investors, students and researchers in both the EU and the UK, the situation will remain “unchanged” during the transition period.

Extending the transition period

Although 31 December 2020 was agreed in principle as the deadline for the transitional phase, this will depend on how the negotiations on the future relationship evolve. There are many issues on the table: trade agreement, economic cooperation, police and criminal justice issues, foreign policy, security and defence… so an extension takes almost all the ballots right away.

However, the UK and the EU will have to decide before 1 July this year whether they want to extend the transition period beyond 2020. There can only be one extension and it could last “one or two more years” at most, according to the European Commission. In that case, the scenario would remain unchanged longer.

The talks will start in March. On the European side, a working group for relations with the United Kingdom will be set up, led by Michel Barnier, who was chief negotiator during the first phase.

What are the UK’s obligations until December?

Between February and December this year, all EU law, in all policy areas, will continue to apply in the UK. The UK market will remain in the Customs Union and the European single market, will continue to implement EU justice and home affairs policy, and will have to respect all international agreements signed by the European Union. The EU’s common foreign and security policy will also be implemented during this phase. This is further proof that the Brexit, as such, has not yet happened. If the British and the Europeans were to agree on an extension of the transition period, this scenario would be maintained for a longer period.

Can the UK negotiate trade agreements?

London is free to negotiate trade agreements but its hands are tied to implement them. During the transition period, “the UK will be able to conclude international agreements with third countries,” the EU explains, even in areas of exclusive EU competence. However, it will only be able to start implementing these agreements after the end of the transition period, because during this period, the UK market is subject to the customs union. Already during the negotiation of the first phase of the agreement, the UK has been optimistic about the pacts it will sign, especially with the US. The big question is whether, now that it does not have the backing of 500 million consumers represented by the EU, it will see its negotiating power reduced or the historic alliance with the US prevailed.

How much is the Brexit bill?

The UK will have to pay its fair share of the commitments made during its membership of the club. Even if it leaves the EU, London must fulfil its financial obligations in the EU budget for the period 2014-2020 (it will contribute to the 2019 and 2020 items as if it were still a Member State). It will also have to meet its obligations under programmes such as the Turkish Refugee Facility or the European Development Fund.

As far as the invoice numbers are concerned, although the methodology for calculating the UK’s financial obligations has yet to be agreed, the amount is estimated at Brussels also clarifies that “no Member State should pay more or receive less because of the UK’s withdrawal from the Union”.

What to do to become a lifelong resident

Those who are already resident in the UK (or UK residents in any EU country) have guaranteed rights of residence, work and access to healthcare. “Protecting the life choices of these citizens has been the first priority,” the commission said.

You have to register as a resident in the Registry System and you have until June 2021,” explains the British embassy in Madrid. Anyone who has been a resident for five years will receive settled status. Foreign nationals who have been in the UK for less than five years will receive pre-settled status and can apply for settled status when they reach five years of age. There are already more than 170,000 registered Spaniards of the 2.45 million Europeans with these statuses.

Family members of these residents who are not yet resident in the country will also enjoy this right.

Do you want to move in now?

If you are planning to live in the UK, it will be much easier if you do so before the end of the transitional period. “If you leave before 31 December this year you will enjoy the same conditions as those who are there now. You will also have to register as a resident,” says the British Embassy. In order not to lose the status, however, the citizen will not be able to leave the United Kingdom for more than 5 years in a row.

Once the transitional period is over, European citizens who want to reside in the UK will have to comply with the requirements imposed by the Anglo-Saxon country, which will be announced by the British government later this year.

What about tourists?

During this year it will continue to be possible to travel to the United Kingdom as to any other EU country, using the ID card and passing through the corridors of the airports intended for European travellers. “Any changes from 2021 will be notified in good time,” the British Embassy said. In the last talks, both parties were considering the option of not requiring a visa for short stays.

As for the Spanish who are registered as residents in the United Kingdom, they will be able to continue using their ID card at least until 2025.

During the transitional phase, moreover, both Spaniards travelling to the UK and British visitors to Spain will be able to continue using their mobile phones (and roaming) as before. From 2021, it will depend on the agreement reached.

How to study in the UK?

The British Embassy reports that the UK will continue to participate in the Erasmus+ Programme until 31 December 2020. In fact, the British Government is open to maintaining its participation in the plan, although everything will depend on how the negotiations evolve.

On the other hand, anyone wishing to have their professional qualification recognised after the transitional period must apply by 31 December 2020.

How to access health care?

EU citizens resident in the UK must register with the UK National Health System (NHS). Tourists will still be able to use their European Health Insurance Card when travelling in the UK, but once the transition period is over it will no longer be in force.

Free trade for 11 months

EU and UK companies will be able to continue to trade as they have done in the past, without any barriers, for the next 11 months (or until the transition period, if extended). The type of future trade relationship will depend on the agreement reached between the UK and the EU.

What about exports?

Any goods that have legally entered the European market or the UK before the end of the transition period will be able to continue to move freely until they reach their destination, without the need to alter or re-label the products or meet any other additional requirements. EU excise duties, VAT and customs are also maintained if the trade takes place before the UK’s withdrawal from the customs union. This duty applies to agricultural, consumer, health-related, industrial, machinery, construction and chemical products, etc.

There is, however, an exception for live animals or animal products or foodstuffs. Even if these products enter the market of destination before the end of the transitional period, they will have to be subject to EU or UK rules on imports from third countries from December 2020, due to the high health risk involved.

What about geographical indications?

The strategic value that products with designations of origin and geographical indications have for local markets has been established as a priority in the Brexit negotiations. As a result, more than 3,000 GIs, such as Champagne, Parma ham, feta cheese or sherry vinegar will be protected under UK law while maintaining existing protection under EU law.

Don’t be so quick to dismiss your contingency plan

Preparing a contingency plan to mitigate damage in the event of a chaotic Brexit became a mantra for governments and businesses as the date of the divorce approached and the deadlock in negotiations suggested a possible way out without agreement.

But the fact that there is now an agreement does not guarantee that we will be on solid ground. The Spanish Exporters and Investors Club recommended yesterday that Spanish companies “keep their contingency plans in place, as there is still great uncertainty about the possible outcome of the negotiations”, as they see “it is very difficult to reach an economic agreement in the remaining eleven months, given the breadth and complexity of what needs to be addressed”.

Access to financial services: a priority at risk

Although bankers and investors breathe a sigh of relief knowing that nothing changes during the transition period, there is a tense calm latent in the air. The cross-border provision of financial services between the EU and the UK is guaranteed until December. However, both sides must decide by July 2020 what the future relationship in the financial services area will be. The great risk is the loss of the Community passport, which means that financial institutions will have to adapt to the regimes of third countries in order to continue providing services in Spain and vice versa.

What about pending public contracts?

The withdrawal agreement provides legal certainty for pending public procurement procedures before the end of the transitional period. These will be completed with the EU rules under which they were initiated.

What will be the status of Northern Ireland?

During the negotiations, the situation in Northern Ireland became sensitive and the main red line, to the extent that it triggered the renegotiation of the agreement. Finally, the UK and the EU agreed that, after the end of the transitional period, a set of rules related to the EU single market (goods legislation, health rules, VAT, excise duties…) will continue to apply in Northern Ireland in order to avoid a physical border. At the same time, Northern Ireland will continue to be part of the UK customs territory and will therefore be eligible for future free trade agreements. The Northern Ireland Assembly will decide, by simple majority, four years after the end of the transitional period, whether it wants to continue to apply EU rules or vote against them.

What about Gibraltar?

Brussels is adamant that “no agreement between the Union and the United Kingdom can be applied to the territory of Gibraltar without an agreement between the Kingdom of Spain and the United Kingdom”. And although the negotiations in the first phase have already been concluded, the sovereignty of the Rock has not yet been agreed. Although both parties have signed several bilateral memorandums to guarantee the movement of citizens who travel to the Rock every day to work, the truth is that the future relationship with Gibraltar, beyond an area of shared prosperity, as the Spanish government hopes, is not clear.