The UK is finally establishing ties with the EU. Here’s what’s changing.

The United Kingdom left the European Union on Thursday, 48 years after joining the bloc, a significant shift in the world order that will also bring about major changes for ordinary Britons.

On 1 January, decades of trade with the EU, which is not hampered by customs declarations and regulatory barriers, will cease, one of several changes likely to have a major and lasting effect on the UK economy. The rights of a British citizen to live, work or study in any other EU Member State will also be waived, emphasizing the extent of the EU in the daily lives of citizens. EU citizens will also lose rights in the UK

For Brexit supporters, including Prime Minister Boris Johnson, such costs are justified by the benefits and opportunities that exit from the EU will bring. If they leave, the UK will be able to promote British trade with the rest of the world and enact laws to shape its economy and society without the interference of Brussels, they say.

“Brexit is not an end, but a beginning, and the responsibility now rests on all of us to make the best use of the powers we have regained,” Johnson said on Wednesday during a debate on the UK-EU Free Trade Agreement. in Parliament.

The agreement reached on Christmas Eve between London and Brussels on the terms of their future relationship covered more than 1,000 pages, covering areas of such diverse areas as fishing rights and co-operation between law enforcement agencies.

Some important parts of the UK’s post – EU arrangements with its neighbors have yet to be completed, in particular the long-term basis for trade in financial services and the cross-border exchange of data. The United Kingdom is a major exporter of the former, while the latter is one of the major lubricants in global trade.

For businesses, the biggest changes will be felt on 1 January by UK exporters and importers trading with the EU. New procedures for customs declarations and regulatory paperwork will come into effect. Tariffs will not be levied on trade in goods, but companies importing components from around the world to produce goods for sale in the EU must comply with the rules of origin, which specify a minimum level of foreign input that can contain a final product. to avoid tariffs.

Construction on a domestic border facility in Sevington in the south-east of England continued on Thursday.


Gareth Fuller / Zuma Press

The UK has said it will give businesses bringing goods to the UK some leeway to apply the new rules to smooth the passage of goods. The EU has not given such assurance and has increased the possibility that delays and disruption of cross-border trade will occur while the new arrangements come into effect.

This disruption is likely to hamper economic growth, especially in the first quarter, and will continue throughout the year, Citi economists said in a research note this month. They said the consequences were likely to be accompanied by the pandemic, which diverted drivers in the UK from the necessary preparations. A survey by the Bank of England in November among corporate executives found that only 40% said they were fully ready for January 1st.

Overall, Citi estimates that the disruption will reduce UK gross domestic product by around 2% by 2021, compared to what it would have been if it remained within the EU’s internal market, its common regulation zone and its customs territory.

Service businesses face similar, if not, greater challenges from January 1st. The Free Trade Agreement between the United Kingdom and the EU contains only general provisions for trade in cross-border services that do not correspond to the level of access within the internal market. , the Institute of Government said in a report published after the agreement was reached.

The IfG, a non-partisan think tank focused on policy-making, said UK service companies would also face local constraints, depending on the laws that individual member states apply to non-EU companies. For example, professional qualifications will not always be automatically recognized, and business travelers may need a visa to see clients, depending on their length of stay. No obstacle applies to professionals of EU members. Some services are completely banned for non-EU providers.

“British citizens, for example, will not be able to sell in Italy or construction services in Cyprus. They will not be able to be surveyors or tobacco traders in France, ”reads the IFG report.

Most UK-based financial services companies will no longer be able to provide services to EU clients from 1 January, pending a so-called “equivalence” decision by the EU on the extent of market access yet to be made. However, the Bank of England said in November that major UK banks, insurers and asset managers had already established subsidiaries in the EU to ensure no disruption to their operations in the EU.

Most UK-based financial services businesses will no longer be able to provide services to EU clients.


simon dawson / Reuters

The UK Treasury has granted temporary permission to EU companies offering a range of financial services to clients in the UK, but the EU has done the same just for clearing some financial assets through UK exchanges. EU officials have said they can not provide a timeline for giving equity to the UK financial services sector, although the two parties are expected to conclude a co-operation agreement on financial regulation by the end of March.

Data is another outstanding issue. Businesses will still be able to move personal data electronically across the UK-EU border on 1 January, for up to six months. The EU has said it will decide whether UK legislation meets the standards to allow the continued dissemination of data in the first few months of 2021.

Brexit will change trade even within the UK. To avoid the need to rebuild a customs border on the island of Ireland, Northern Ireland remains in force in the EU’s customs territory and internal market. This will require a greater number of controls on products moving from the British mainland to Northern Ireland.

An agreement between the United Kingdom and the European Union took place at the end of December, a few days before the deadline for the end of the year, which gave Britain considerable freedom to deviate from EU regulations and free trade agreements with other countries. to sign. Photo: Paul Grover / Pool (Originally published on December 24, 2020)

For British families, January 1 will also bring changes. Tourists with a British passport will no longer be able to use EU motorways with automatic gates at airports. Those who travel to destinations in the EU have the opportunity to buy tax-free – but they will experience new restrictions on how much alcohol they can buy. EU restrictions on certain mobile phone charges are no longer applicable, which probably means higher prices for international calls and text messages.

UK students will have higher rates and entry requirements to study at EU universities. And pets that can travel freely through the block with their owners under an EU passport program for pets will need a veterinarian from January 1 to provide them with clean health care to enter an EU country.

Write to Jason Douglas by [email protected]

Copyright © 2020 Dow Jones & Company, Inc. All rights reserved. 87990cbe856818d5eddac44c7b1cdeb8