The UK is finally cutting ties with the EU. Here is what is changing.

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The UK leaves the European Union behind on Thursday, 48 years after joining the bloc, a significant shift in the world order that will also bring big changes for ordinary Britons.

On January 1, decades of trade with the EU unhindered by customs declarations and regulatory hurdles will end, one of many changes that could have significant and lasting effects on the UK economy. The rights of a British citizen to live, work or study in any other EU member state will also disappear, underscoring the extent of the EU’s reach in the daily lives of its citizens. EU citizens will also lose these rights in the UK

For Brexit supporters, including Prime Minister Boris Johnson, these costs are justified by the benefits and opportunities that leaving the EU will bring. The departure will allow the UK to boost UK trade with the rest of the world and establish laws to shape its economy and society without interference from Brussels, they say.
“Brexit is not an end but a beginning and it is now the responsibility of all of us to make the best use of the powers we have regained,” Mr Johnson said on Wednesday during a debate on the free agreement -exchange between UK and EU. Parliament.

The agreement reached on Christmas Eve between London and Brussels on the terms of their future relationship has exceeded 1,000 pages, covering areas as diverse as fishing rights and cooperation between law enforcement agencies.

Nonetheless, some major areas of the UK’s post-EU agreements with its neighbors still need to be completed, including the long-term basis for trade in financial services and cross-border data exchange. The United Kingdom is a major exporter of the former, while the latter is one of the most important lubricants in world trade.

For businesses, the most significant changes on January 1 will be felt by UK exporters and importers who trade with the EU. New procedures on customs declarations and regulatory paperwork will come into effect. Customs duties will not be levied on trade in goods, but companies importing components from around the world to produce goods for sale in the EU will have to comply with rules of origin, which specify a maximum level of foreign inputs that a finished product may contain to avoid tariffs.

Work continued on Thursday to complete construction of an inland border facility in Sevington, in the south-east of England.

Photo:
Gareth Fuller / Zuma Press

The UK has said it will give companies importing goods into the UK some leeway to enforce the new rules to facilitate the passage of goods. The EU has not given such assurance, raising the possibility of delays and disruptions in cross-border trade while the new arrangements take place.

This disruption is likely to hurt economic growth, particularly in the first quarter, and to persist throughout the year, Citi economists said in a research note this month. They said the effects would likely be made worse by the pandemic, which has sidelined UK business executives from necessary preparations. A Bank of England survey of business leaders in November found only 40% of them said they were ready by January 1.

Overall, Citi estimates that the disruption will reduce the UK’s gross domestic product in 2021 by around 2%, compared to what it would have been had it remained in the EU’s single market, its common regulatory area and customs area.

Service companies face similar, if not greater, challenges starting January 1. The UK-EU free trade agreement included only general provisions for cross-border trade in services that do not match the level of access available in the single market, the Institute for the government in a report released after the deal was agreed.

The IfG, a non-partisan policy-making think tank, said UK service companies will also face local restrictions based on the laws member states apply to non-European businesses. Professional qualifications will not always be automatically recognized, for example, and business travelers may need a visa to see clients depending on the length of their stay. Neither barrier applies to professionals from EU member states. Certain services are totally prohibited for non-European suppliers.

“British nationals will not be able, for example, to sell actuarial services in Italy or construction services in Cyprus. They will not be able to be surveyors in Bulgaria or tobacconists in France ”, indicates the IfG report.

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

Most UK based financial services companies will no longer be able to provide services to EU customers.

Photo:
Simon Dawson / Reuters

The UK Treasury has granted a temporary clearance to EU companies offering a range of financial services to UK clients, but the EU has only done so for clearing certain financial assets through UK exchanges. EU officials said they could not give a timeline for equating the UK financial services sector, although the two sides are expected to reach a financial regulatory cooperation deal by the end. of March.

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

Brexit will change trade even within the UK To avoid having to rebuild a customs border on the island of Ireland, Northern Ireland remains in effect in the customs area and the single market of the ‘EU. This will require an increased number of checks on products transiting from the UK mainland to Northern Ireland.

An agreement between the United Kingdom and the European Union was reached at the end of December, a few days before the end of year deadline, giving Britain great freedom to deviate from EU regulations and sign free trade agreements with other countries. Photo: Paul Grover / Pool (originally posted December 24, 2020)

For British families, January 1 will also bring changes. Tourists with a UK passport will no longer be able to use the fast lines for EU citizens with automatic gates at airports. Those traveling to EU destinations will have the option to shop duty free, but will face new restrictions on the amount of alcohol they can buy. EU caps on certain cell phone charges will no longer apply, which will likely lead to higher prices for international calls and texts.

UK students will face higher tuition fees and entry requirements to study at EU universities. And pets, which could travel freely with their owners throughout the block under an EU pet passport program, will need a veterinarian from January 1 to issue them with a own health certificate to enter an EU country.

Write to Jason Douglas at [email protected]

Corrections et amplifications
EU rules of origin specify a maximum level of foreign inputs that a finished product can contain to avoid tariffs. An earlier version of this article incorrectly stated that the rules required a minimum level. (Corrected December 31)

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