The UK is no longer a member of the Single Market or Customs union and therefore EU law no longer applies to the UK since the 31st of December 2020. The UK-EU trading environment has changed and is now governed by the EU-UK Trade and Cooperation Pact which was agreed upon back on December 24th 2020 and is being provisionally applied pending approval from the EU.
EU-UK Trade and Cooperation Pact – Trade-in Goods
A major point under this agreement is that trade in goods remains 100% liberalised. This means that there are no quotas or tariffs on the movement of goods, subject to rules of origin requirements.
This addressed the regulatory trade barriers and allows both parties the freedom to regulate goods in the way most appropriate for their own market and bypasses the Technical Barriers to Trade chapter. It’s worth remembering that domestic regulation provisions attempt to limit ‘behind the border’ barriers, such as lengthy and opaque authorisation processes.
Investment and Services under the Pact
For the UK, this agreement provides a legal guarantee that service providers will not face barriers to trade when selling into the EU. It also enables market access to service providers across a broad range of sectors. These include legal services as well as road, air and maritime services along with other professional services.
Excluded largely from the deal were financial services. Essentially, UK financial service providers have effectively lost their ‘passporting’ rights to access the Single Market. What this means is, they may be reliant on future ‘equivalence decisions’ to operate in the EU on previous terms. They may also require certain authorisations at the member state level.
Under the agreement, it prevents new restrictions on short-term business visitors, who are permitted to travel to the EU for up to 90 days in any 180-day month period. The EU and the UK have also agreed not to impose work permits on business visitors. The deal goes on further to guarantee that intra-corporate transferees can be accompanied by their partners and dependents when assigned to work abroad.
The pact also provides for individuals moving between the UK and the EU will have their social security position protected. This will allow individuals to have access to a host of social security benefits, including reciprocal healthcare cover and state pensions. It’s worth noting from an employer standpoint, that employers are liable to pay social security contributions on in one state at a time. This is normally in a country where work is undertaken.
Things to Consider
The EU-UK trade will remain tariff-free, however, it’s worth noting that the UK has lost access to other countries’ markets under the terms of the EU free trade agreements. The UK does have several new FTAs negotiated and in the pipeline. However, trade with numerous third countries could now be subject to new and considerable barriers to trade, such as tariffs and bureaucratic customs rules.
On financial services, this is not the most ideal situation and could affect the types of services that can be offered and to whom. This may lead to further negotiations to resolve this issue.
Regarding law and regulation, the UK rules remain broadly equivalent to the EU’s for the moment. However, it should be expected that the legal framework in the UK will diverge in time and this will include its case law.