Brexit Confirmed for 31 January 2020 as UK Seeks Canada-Style Trade Agreement

As we have reported previously, the result of the European Union referendum (Brexit) was announced on 24 June 2016 with a vote in favour of the UK leaving the EU.

We have issued a series of Brexit updates since the date of the referendum. To access such prior alerts, please visit our Brexit page.

The newly-formed UK Parliament votes in favour of Boris Johnson’s Withdrawal Agreement as the UK prepares to leave the EU on 31 January 2020, followed by a transition period that will last until 31 December 2020

As we reported on 5 November 2019, the UK government made the European Union (Withdrawal) Act 2018 (Exit Day) (Amendment) (No. 3) Regulations 2019 (SI 2019/1423) on 30 October 2019 to postpone the date that the UK will leave the EU from 31 October 2019 to 31 January 2020 (“Exit Day”).

Following the UK general election of 12 December 2019, which gave the Brexit-backing Conservative Party a parliamentary majority of 80, the UK’s House of Commons voted on 9 January 2020 to support a bill to adopt UK Prime Minister Boris Johnson’s Withdrawal Agreement (the “Bill”), which sets out the terms of the UK’s exit from the EU. The Bill has since been approved by the UK’s House of Lords and received royal assent on 23 January 2020 to become UK law.

The key terms of the Withdrawal Agreement include:

1. the departure of the whole of the UK from the EU customs union (a union between EU member states not to charge tariffs on goods/services coming from other EU member states, and to charge the same tariffs as each EU member state on goods/services coming from outside the EU), which will enable the UK to strike trade deals with non-EU countries in the future;
2. the creation of a customs border between Northern Ireland (which stays as part of the UK) and the Republic of Ireland (which remains a member of the EU). In practice, goods will be checked at the “points of entry” from Great Britain into Northern Ireland, meaning that the customs border will serve to separate Great Britain and the isle of Ireland. The UK government maintains that there will be no corresponding checks on goods moving from Northern Ireland into Great Britain but this is to be agreed with the EU;
3. the imposition of a transition period from Exit Day that will last until 31 December 2020 (the “Transition Period”) during which the UK will remain in the single market and the customs union, and will continue to follow all EU legislation; and
4. a requirement for the UK to settle its financial obligations to the EU, which will include UK contributions to the EU budget until the end of the Transition Period. This amount has not been quantified in the Withdrawal Agreement but was estimated to be approximately £32.8bn by the UK’s Office for Budget Responsibility based upon the previously proposed Exit Day of 31 October 2019.

On 24 January 2020, the Withdrawal Agreement was signed by the heads of the European Commission and Council. The Withdrawal Agreement still needs to be ratified by the European Parliament before the UK leaves the EU. Members of the European Parliament are due to vote on the Withdrawal Agreement on 29 January 2020.

After Exit Day, the UK intends to agree a Canada-style trade agreement with the EU during the Transition Period. This would mean that the UK will no longer be a member of the single market and customs union, and will cease to remain aligned with EU legislation from 1 January 2021.

Finalising such a trade agreement before the end of 2020 will be challenging for both negotiating teams from the UK and the EU.

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Mark Dorff

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Neil Micklethwaite

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