On 24 December 2020, the UK and EU agreed a new Trade and Cooperation Agreement (TCA) to govern the future trading and security relationship following the UK’s departure from the EU in January 2020. The deal provides firms with vital certainty, avoiding costly tariff and quota restrictions that both sides would have faced in a no deal scenario.
But, with just days to prepare for the end of the transition period, key questions remain unanswered. Detailed, practical and actionable guidance is urgently needed to help firms calibrate their operations and prepare for the UK’s new trading relationship with the EU from 1 January 2021.
This paper provides a headline summary of what the deal means for business, how it will be ratified and the support available to CBI members in the immediate term. As the fine print of the detail is analysed, the CBI will publish a more detailed assessment, setting out what the deal means for key sectors of the UK economy.
1. Key takeaways from the deal for business
Customs and Movement of Goods
The UK and the EU agree to zero tariff and zero quota trade on goods, meaning businesses will not face costly tariffs. Access to zero tariffs will depend on whether goods meet the Rules of Origin required in the agreement to qualify as ‘local’, however the EU and UK have jointly agreed additional flexibility in collecting documentary evidence to provide paperwork. However, the agreement means customs declarations and paperwork to process the movement of goods – including SPS checks for live animal and products on animal origin – will be required on 1 January for UK exports to the EU, and will have a phased introduction for UK imports from the EU.
There is no mutual recognition of conformity assessments in the agreement, meaning many goods – from lipsticks to mattresses to toys – will have to undergo two sets of conformity assessments rather than one. However, in specific sectors such as medicines, automotive, organics, wine, and chemicals, the UK and the EU have agreed to streamline conformity assessments.
Data adequacy is not included in the UK-EU trade agreement. However, a joint declaration published alongside the deal makes it clear the EU will undertake an adequacy assessment. Until that decision is made, a temporary arrangement to allow data to continue being transferred from the EU to the UK from 1 January has been agreed. This period will last for four months and can be extended to six, providing the UK makes no changes to its own data protection laws during the grace period. This means businesses transferring data from the EU to the UK will not need to put in place alternative measures such as standard contractual clauses from 1 January.
The agreement contains provisions on temporary entry for work purposes, limited to 90 days in any 180 day period, and the mutual recognition of professional qualifications (MRPQs). However, the list of activities permitted on visa-free short-term business trips is limited and means some professionals – including many from the creative industries – are unlikely to benefit. Activities permitted will also vary between EU member states. On MRPQs, automatic mutual recognition will end on 1 January.
The UK and the EU agreed to commitments on market access for services, prohibiting discrimination between UK and EU nationals and removing the requirement for businesses to open a local subsidiary before services can be provided. However, there are a substantial number of exemptions in the annex of the agreement and the level of access for UK services firms will vary sector by sector and from one-member state to another.
2. Ratification of the deal
On 30 December, the House of Commons and House of Lords met to ratify the agreement. Despite opposition in some quarters – most notably the SNP, the Liberal Democrats, the DUP, and some Labour MPs – the government’s commanding majority and Labour leader Keir Starmer instructing his party to vote for the deal, meant the deal secured parliamentary approval with ease.
The deal will come into force at 11pm on Thursday 31 December, as the transition period ends.
EU ratification and provisional application
On 28 December, EU ambassadors unanimously approved the ‘provisional application’ of the UK-EU treaty. While the green light from ambassadors is an important step, some countries, such as Sweden, still need to consult their national parliament. On December 30, Commission President Ursula von der Leyen signed the treaty, alongside European Council President, Charles Michel. The European Commission presented the treaty as an EU-only agreement with a limited provisional application until February 28, 2021. This means that the EU can provisionally implement the agreement with the approval of EU countries but without the consent of the European Parliament. MEPs said they will scrutinise the deal at the beginning of 2021.
3. Support for members
While the announcement of a deal is an important moment, it is not the end of the journey. Coming so late in the day it is vital that both sides take steps to keep trade moving and services flowing while firms adjust.
While we continue to analyse the legal text and accompanying guidance, the CBI will continue to offer a range of support for member business over the Christmas period.
1. Keeping you informed
Over the coming days, members will receive regular email updates on the latest progress and CBI insights. Alongside these emails, members can contact EUnegotations@CBI.org.uk with any burning questions and we will endeavour to respond as soon as possible.
The CBI’s UK transition hub remains open to all businesses – members and non-members - and we’ll be keeping the CBI’s Brexit Bulletin up to date with all the latest information and guidance as it’s published.
2. Securing clarity on outstanding issues
The CBI has been clear that, as a first step, both sides should prioritise turning complex legal text into actionable, practical guidance for businesses. Many issues - from data flows to business visas - are still not clear. Firms need these details in black and white before they can take the necessary steps to prepare.
Over the coming days, the CBI will continue to engage with our networks across UK government departments and in Brussels to feed in the key issues where firms require urgent clarity, guidance, and detail.
3. Smoothing the cliff edge
While today’s progress is welcome, it’s not the end of the road. We need urgent confirmation of grace periods to smooth the cliff edge; immediate guidance on what’s required from data to rules of origin; and action taken to avoid the border chaos seen in recent days.
The CBI will now move quickly to highlight the actions both sides need to take - working closely with our sister federations in the EU - to smooth the cliff edge for firms. Drawing on the 48 recommendations detailed in the CBI’s latest Brexit report as a guide, we will ensure policymakers understand the steps that must be taken to minimise disruption on 1 January.