Beyond Brexit: What does 2021 hold?

Four years, 27 weeks and two days since the referendum on Brexit, the UK left the EU at 11pm on Thursday 31 December with a deal in place. Big Ben chimed to mark the occasion across empty streets given the tightened restrictions introduced across the UK over Christmas.

Now that a UK-EU trade deal has been reached at the end of the transition period, what does this mean for your business and its people strategy? We outline, subject to last minute negotiations, the immediate impact on your business and longer-term planning ramifications of Brexit on UK business and international trade.

Changing relationship with the world

Individuals and businesses face an array of new red tape, with the vast majority of this still to be confirmed. Travel, residency, work and tourism, in addition to goods and services will be subject to new regulations, the finer details of which are yet to be set in stone. After the Covid-19-related delays seen over Christmas at the ports in Kent, thousands of lorries were backed up and fears grew for what further chaos Brexit might induce. The government is focused on ensuring this does not happen again with no initial signs of congestion, but some have halted European services to assess the impact and whether it is worth the investment. 10 sites have been prepared for possible disruption this week as trade picks up again in the new year.

Hauliers now need a negative Covid-19 test within the last 72 hours and Kent access permit to enter France, without which they can be sent back without the 24-hour pass. These pre-requisites for crossing the border may undermine the smooth start to the new arrangements. Border fluidity is key, with Gibraltarians able to move freely between British overseas territory and the EU and Transport Secretary Grant Shapps saying a deal had been reached to ensure UK drivers will not need an international drivers permit when using a vehicle in all 27 EU member states.

However, the government estimates that more than half of smaller businesses have not yet prepared for the end of the free movement of goods and services, so it is worth checking what you still have to do to comply with the new tapestry of regulations governing the EU-UK deal. The government’s Brexit checker enables you to access a personalised list of actions for you in light of the new rules.

Ongoing coronavirus crisis

As Boris Johnson used his New Year message to mark “an amazing moment for this country”, the focus remained on challenges posed by the pandemic in the coming months. The vaccine that Johnson rightly credited “thanks to government scientists” for is now being rolled out and return to ‘normal life’ is largely attributed to this mass roll-out. There is also hope that the vaccination programme will lead to a return to normality where people see the post-Brexit period as an opportunity.

The independent Office for Budget Responsibility forecasts the UK economy will be four per cent smaller over the long term than it would have been if the UK had stayed in the EU. However, whilst this is a bigger effect on the economy than the one caused by Covid-19 itself, if no deal had been the outcome, it would have been even bigger. Agreements of this kind usually take years of negotiations, so the deal was achieved against the odds. The government says that one of the main benefits of Brexit is the UK’s ability to make its own sovereign decisions and to negotiate its own trade deals around the world. Therefore, the initial costs of leaving the customs union will outweigh the long-term competitive edge the UK will gain.

Previous freedoms

The government argues that the new arrangements will support numerous opportunities for trade and innovation. So, what freedoms came to an end for British businesses on the 31 December? We have outlined a snapshot of the key ones affecting business’ operational strategy for the year ahead:

• Free movement of goods – an unprecedented 100 per cent tariff liberalisation has been agreed, the first time the EU has agreed a zero tariff, zero quota deal with any other trading partner, buoying hopes that existing supply chains will remain intact. The ‘non tariff barriers’ to trade with the EU may also reportedly pose £7bn in bureaucracy for businesses in light the UK’s exit. The onus is on businesses to identify the opportunities within the new regulatory system governing the movement of goods in a global market.
• Free movement of services – the trade deal is arguably more favourable than the deal in services. Some have argued that this area remains a loose end of the December deal, with a memorandum of understanding on regulatory cooperation on financial services due in March. For now, a ‘regulatory patchwork’ is in place – for example, the deal failed to clarify whether UK civil judgments will be recognised after January 1. Uncertainty remains about the finer details of providing services in Europe, particularly in the legal industry and the mutual recognition of professional qualifications, which will be negotiated on a profession by profession basis.
• EU workforce – the new immigration system also takes effect which seeks to attract the best and brightest global talent to UK businesses. EU citizens no longer have the automatic right to settle in the UK and have to apply for visas to live, work and study if they wish to remain longer than six months. Those with a significant EU workforce are likely to have already faced these workforce challenges over the transition period in supporting eligible employees to attain the newly required ‘settled status’ and remain in the UK for work purposes. The deadline to apply is 30 June 2021.
• Free movement of people – British travellers to the EU will need to have six months left on their passport and check that their passport is less than 10 years old. Previously, free travel was in place; the passport only needed to be valid for the duration of the stay. Those planning to stay for more than 90 days may need to apply for a visa or permit.
• A new border with Northern Ireland – obstacles to trade will now be in place with Northern Ireland who remain part of the EU’s customs code. A phased-in approach to the post-Brexit relationship with Northern Ireland will involve customs declarations for retailers sending goods to non-business customers in Northern Ireland deferred for three months and animal-based food products shipped there requiring export health certificates from April. These arrangements with the UK will be reviewed in four years’ time but for now, light checks on required declarations governing goods will be consistent with those already in place with existing checks to ensure there is not an unduly heavier burden imposed by greater red tape in recognition of the interconnectivity of the Union.
• A second referendum – there are also reports that unionist sentiments will be fuelled in relation to Northern Ireland and Scotland who voted against Brexit. Scotland’s First Minister Nicola Sturgeon also addressed the EU in an article for Politico where she expressed hope that “Scotland will be back soon Europe. Keep the light on.”

Discover how Brexit affects your strategy for 2021

Scepticism around the new arrangements will persist until all areas of the new ways of working with the EU and the rest of the world are fully tested. Given that 17.4m voters backed Brexit and 16.1m voters wanted to stay in the bloc, this is a watershed moment in the UK’s history. Whilst a deal is done in principle, the UK will be negotiating with the EU for years to come. Negotiations remain in relation to key areas of road transport, aviation, climate change policy and security cooperation, so the finer details of Brexit will remain a key feature in the year ahead. Get in touch with us to help to plan your organisation’s key objectives for 2021.