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The Exit From Brexit – Here’s The Big Deal

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The Exit From Brexit – Here’s The Big Deal

The Exit From Brexit – Here’s The Big Deal

On Christmas Eve 2020, more than four years after negotiations began with the European Union following the Brexit referendum in 2016, the UK government struck a deal which would govern future relations between the island nation and the 27-country continent.

While the UK officially left the EU on 31 January 2020, the remainder of the year was a transition period in which negotiations continued (and in unrelated news, the world turned upside down).

The deal really was concluded at the ‘eleventh hour’, and with the resulting document setting out its terms running to more than 1,200 pages[1], governments, businesses and citizens scrambled to make some sense of it before it came into effect on 1 January 2021. The deal was officially approved by the House of Commons on 30 December with an overwhelming majority of 521 to 73 votes[2].

Before discussing some of the immediate effects of the deal as we venture into the new year, I want to set the tone of this piece with two key points. Firstly, whether you have been backing the ‘leave’ or ‘remain’ camp for what seems like the past eternity, the deal is a positive step, and we should be pleased with it. Why? Because it has finally banished what was, just before Christmas 2020, the real threat of a potentially catastrophic ‘no-deal’ scenario. Indeed, at the start of December, the situation looked bleak. Both Prime Minister Boris Johnson and European Commission President Ursula Von der Leyen indicated that ‘significant differences’[3] remained to be reconciled, particularly over the ‘level playing field’ concept and fishing rights.

Secondly, however, it is important that we do not become disillusioned with the first point. That is to say, the deal still very much comes with ‘strings attached’, and both the UK and the EU will face significant challenges over the coming months and years. As we know, some of these have already reared their ugly heads, whereas others are likely to become apparent in the longer-term.

So, with that in mind, come with me now on a whistle-stop tour of the effects of the deal on some hand-picked aspects of life in January 2021, namely property ownership at home and abroad, leisure and business travel, and cross-border trade.

Property ownership and EU residency

With the deal now in place, the consensus regarding housing markets at home and abroad is that they are unlikely to be heavily affected by Brexit in the short term. House prices may fall slightly if there are significant job losses, but any impacts of Brexit upon housing markets are much more likely to be dwarfed by those which arise from the UK and the EU’s economic recovery from the COVID-19 pandemic, and the widespread job uncertainty it has brought about. As property sales have increased over the course of the last year, one could fairly speculate that if people are confident enough to purchase property during a global pandemic, they will also be confident to do so in a post-Brexit world. However, one could fairly speculate all day long about many things at present!

After the referendum in 2016, it was expected that the number of UK citizens moving to the EU would fall drastically due to the impact of Brexit, but a study by the OECD and Eurostat has shown this has in fact risen sharply[4]. Now, the actual process of permanently moving to the EU is likely to be the biggest challenge facing UK nationals who yearn for a place in the sun: the impact is set to be not so much upon UK citizens’ ability to purchase properties on the continent, but the immigration rules which govern the extent to which they can live in them.

Since 1 January 2021, UK nationals looking to permanently relocate to the EU have become subject to the individual immigration rules of each member state. They will need to apply for a visa to demonstrate their right to reside and work. New initiatives, including what almost sounds like a Roald Dahl-inspired ‘Golden Visa’[5] residency permit, have been introduced by countries such as Spain, Greece and Malta. The Golden Visa grants residency to UK citizens in return for a form of investment, such as property purchase, creating new jobs, or payment of a capital sum. The scheme can provide a route from permanent residency to full citizenship.

"Of course, the new arrangements governing permanent residency and citizenship in the EU will also involve UK nationals navigating the new travel rules for business and leisure purposes"


Free movement?

For the travel industry, the effects of the global pandemic continue to make up most of their immediate worries, but the deal has at least mitigated some of the risk that these concerns would be worsened by Brexit. For example, air transport rights between the UK and the EU are to remain the same for both passenger and cargo aircraft. However, it is noteworthy that UK carriers with a strong European presence (such as EasyJet) can no longer fly between two points on the continent.

The deal has also alleviated previous fears of a somewhat whacky situation where Brits might require visas to enjoy holidays on the continent. UK nationals can now stay in an EU country visa-free for up to 90 days in a 180-day period. European Health Insurance (EHIC) cards remain valid until they expire, after which travellers will be able to obtain a UK ‘Global’ Health Insurance Card (GHIC) which serves a similar purpose. By the way, this is poorly named in my opinion, given that it clearly doesn’t do what it says on the tin! Anyway, as a keen traveller on the continent (in the sense of not just cheating and flying everywhere), this aspect of the deal certainly resonated positively with me. However, there are three immediately apparent downsides, both for leisure and business travellers:

Firstly, EU pet passports are no longer valid (sorry Mum, Dad and the family dog who love their annual French camping trips). Now, a new certificate is required each time UK nationals travel to the EU with their pets, and it must be obtained 10 days before travel. The certificate is valid for four months and allows for one ‘return trip’ to the EU from the UK[6].

Secondly, in its current form, the deal prevents British film-makers, technicians, models, musicians and performers from travelling around various EU countries for more than 90 days without a work permit[7]. Critics have argued that the fallout from this restriction is likely to be compounded by the already devastating effects of the global pandemic.

"As a result, more than 250,000 individuals (including prominent performers such as Elton John and Ed Sheeran) have signed a petition which calls upon the government to provide a free ‘culture work’ permit for touring UK musicians in the EU[8]."

In my opinion, some sort of compromise is likely to be reached: the restriction seems to create quite a ludicrous situation without real justification and I would be very surprised if it stands. Even if it is the result of the EU’s refusal to budge during negotiations (as the UK government has claimed), the can has still been kicked down the road rather than action being taken and a resolution reached. Thankfully, though, the government have at least indicated that “the doors remain open” for further talks[9].

Thirdly, the UK has withdrawn from the EU-wide Erasmus study abroad programme. Even though Boris Johnson has vowed to replace this with a UK own-brand alternative, it has quite rightly garnered widespread criticism as it flies in the face of efforts to tackle issues of mobility, integration and employment between EU countries that negotiations and the resulting deal have tried to preserve.

Trade

Tying in with the potential complications surrounding travel are the new rules on trade to and from the EU. On its face, this is another area where the deal appears to come into its own, as it has preserved tariff-free, quota free access to each other’s markets. Some might say this is another big win over a no-deal scenario, but on closer inspection, is it really all that?

Back in July 2020, the EU Commission warned that even in the event of a deal, there would still be new barriers affecting trade from 2021. Even the most ambitious of trading partnerships would encounter problems. When the UK remained inside the EU Customs Union, there was no need to demonstrate the origin of goods traded between EU countries. Further, no VAT or excise duties were payable. Now, ‘rules of origin’ regulations must be followed in the UK, which could mean separate customs duties are imposed even with a trade deal which preserves tariff and quote free access[10]. Alongside creating more administrative headaches and paperwork nightmares, these potential costs are being dubbed as a ‘hidden hard Brexit’[11], which would require bespoke solutions to avoid disruption to integrated supply chains and ultimately for consumers and shoppers. Naturally, this would incur further expenditure of time and money.

Since the turn of the new year, exports of perishable goods such as meat, fish and fresh foods have been delayed. For example, uncooked meats, such as burgers and sausages, cannot enter the EU unless they are frozen to -18C[12]. This means paperwork that used to take fifteen minutes is now taking hours, and hauliers entering the country are seeing the disruption waiting for them upon exit, and are perhaps starting to think twice about coming in the first place.

All of this contributes to a vicious circle: delays mean disruption of usual supply chain processes, which shortens the shelf life of goods, which ultimately impacts consumers. Normally, the UK exports around £15bn of food and drink to the EU annually, but exports are currently at 25% of their normal volume for this time of year[13]. Of course, the hope is that these issues are short-term, but at present, there really is no set date for the start of the “new normal” for the UK.

In summary, then, what has happened?

In an official sense, the UK left the EU. It is now an independent sovereign nation with the power to make its own decisions and carve out its own future.

In a technical sense, the UK is still very much tied to the EU. The deal, coupled with our geographical status as an island nation means that, whether we like it or not, EU rules on trade, travel and other aspects will continue to govern our ongoing relationship with the continent.

In a practical sense, in the short-term at least, the UK has made many things more difficult for itself.

In an idealistic sense, the UK has created a healthy new ongoing relationship with the EU, and the deal creates hope that the resultant economic turbulence of leaving the EU bloc could be reduced.

Finally, in a realistic sense… your guess is as good as mine. We can only hope the confiscation of hauliers’ ham sandwiches by border officials are more teething problems than a taste of things to come.

Get in touch

For more information on this update, please contact Tom Revitt.

[1] https://www.euronews.com/2020/12/17/life-after-brexit-what-will-change-for-businesses-next-year-with-or-without-a-uk-eu-trade-
[2] https://www.fdf.org.uk/rulesoforigin-eu-uk-fta.aspx
[3] https://www.bbc.co.uk/news/explainers-55180293
[4] https://www.youtube.com/watch?v=mWRmm3YQT1M
[5] https://www.knightfrank.co.uk/research/article/2020-09-08-five-things-you-need-to-know-about-brexit-and-residential-property-markets-before-1-january-2021
[6] https://www.bbc.co.uk/news/uk-41969672
[7] https://www.theguardian.com/politics/2020/dec/29/uk-performers-raise-alarm-as-brexit-deal-threatens-eu-touring
[8] https://www.bbc.co.uk/news/entertainment-arts-55616860
[9] https://www.bbc.co.uk/news/entertainment-arts-55616860
[10]https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/948119/EU-UK_Trade_and_Cooperation_Agreement_24.12.2020.pdf
[11] https://www.theguardian.com/politics/live/2020/dec/30/brexit-deal-bill-coronavirus-boris-johnson-covid-live-news-updates
[12] https://www.independent.co.uk/news/uk/politics/eu-brexit-trade-talks-ursula-von-der-leyen-b1766806.html
[13] https://www.schengenvisainfo.com/news/rights-of-british-second-home-owners-in-france-from-january-1-2021/