After definitively leaving the EU on December 31, 2020, the UK is no longer a member of the Single Market or the customs union, and EU law no longer applies to the UK.
Further, the UK-EU trading environment is now governed by the Trade and Cooperation Agreement, agreed on December 24, which is being provisionally applied pending approval from the EU.
Significantly, under the agreement, trade in goods remains 100% liberalised, meaning that there are no tariffs or quotas on the movement of goods, subject to rules of origin requirements.
The Technical Barriers to Trade chapter addresses regulatory barriers to trade and allows both Parties the freedom to regulate goods in the way most appropriate for their own market. However, the Domestic Regulation provisions attempt to limit 'behind the border' barriers, such as lengthy and opaque authorisation processes.
Services and Investment
From the UK perspective, the agreement provides a legal guarantee that service providers will not face barriers to trade when selling into the EU. It also enables market access to service providers across a broad range of sectors, including legal services; road, air, and maritime services; and other professional services.
However, financial services were largely excluded from the deal. UK financial service providers have effectively lost their 'passporting' rights to access the Single Market. This means they may be reliant on future 'equivalence decisions' to operate in the EU on previous terms. They may also require certain authorisations at member state level.
The agreement prevents new restrictions on short-term business visitors, who are permitted to travel to the EU for up to 90 days in any 180-day month period. The UK and the EU also agreed not to impose work permits on business visitors. Further, the deal guarantees that intra-corporate transferees can be accompanied by their partners and dependents when assigned to work abroad.
The deal provides that individuals moving between the UK and the EU will have their social security position protected. As such, individuals have access to a range of social security benefits, including reciprocal healthcare cover and state pensions. Also, employers are liable to pay social security contributions only in one state at a time — normally in the country where work is undertaken.
Some Issues to Consider
While UK-EU trade will remain tariff-free, it must be remembered that the UK has lost access to other countries' markets under the terms of EU free trade agreements. The UK has several new FTAs negotiated and in the pipeline, but trade with numerous third countries could now be subject to new and considerable barriers to trade, such as tariffs and bureaucratic customs rules.
The situation for financial services is also not ideal and may affect what types of services can be offered and to whom. This may take additional negotiations to resolve.
In terms of law and regulation, UK rules remains broadly equivalent to the EU's — for now. However, it must be expected that the UK's legal framework will diverge in time, including its case law.