Brexit and the aches and pains of the Transition Period
The Transition Period of almost one year lasting until 31 December 2020 (unless extended by agreement between the parties), which was negotiated as part of the UK-EU Withdrawal Agreement, was intended as a buffer for the UK and for the EU between the UK's exit from the EU (which occurred on 31 January 2020) and the full implementation of its consequences. It was also intended to give time for new trade arrangements to be negotiated between the UK and the EU, if possible.
We are now some weeks into the Transition Period and, whilst industry both in the UK and the EU seems happy with the respite given by the Transition Period, there are some signs of frustration that the Transition Period by its nature creates delay in obtaining the necessary clarity of relationships that both sides need to move forward.
Thus, for instance, the UK-based regional airline, Flybe, has sadly gone into administration as a result of financial losses and one contributory factor to its demise is reported to be the inability of the UK Government to relax the UK Air Passenger Duty regime on Flybe in the Transition Period because of EU state aid rules.
Bentley, the luxury car brand, long associated with the UK but in fact now owned by the German Volkswagen group, is reported in the City AM of 5 March 2020 to be pressing for a UK-EU free trade deal as soon as possible, in priority to a UK deal with the US, because according to its chief executive Adrian Hallmark, 24% of Bentley's sales are in the EU and 90% of its parts purchases are from the EU. It seems clear that such a free trade deal between the UK and the EU cannot come soon enough.
According to a report in The Times on the same date, the European Academies Science Advisory Council (Easac) has argued that EU restrictions on gene-edited crops (which apparently are different from conventional genetically modified crops) are preventing the production of nutritious, low-impact food. The UK Government has indicated that it wishes to use the opportunity of Brexit to allow more development of genetically modified and gene-edited crops.
These are three examples of how the Transition Period is in a way frustrating the desire of some business sectors to move forward rapidly towards adopting a clear and new business-friendly regulatory regime.
On 2 March 2020, the House of Commons library published a detailed briefing paper , entitled "The UK-EU future relationship negotiations: process and issues". This is a very useful piece of analysis around the UK-EU trade negotiations, which began the same day. The briefing paper runs to some 92 pages, which indicates how much ground may need to be covered in the Transition Period - negotiating under this time pressure will no doubt produce its own "aches and pains"!
The impact of Covid-19 (aka "Chronovirus") on economic activity during the Transition Period is not yet clear but will no doubt be closely scrutinised.
Unsurprisingly, the "Transition Period" is a key time for both the UK and the EU.
