Brexit update: No extension of the transitional period

Where we are in the Brexit process at this moment

When a deal on the withdrawal of the United Kingdom from the European Union was drafted, the negotiators had anticipated that there could be delays in finalizing the future agreement between the EU and the UK. They therefore stipulated that the transition period could be extended by a maximum of two years, and it would be up to the UK government to decide whether to extend it. The extension deadline ended on June 30 without action being taken. This means that the UK will fully leave the EU on December 31, 2020, most likely without a trade agreement.

How we got here

On June 23, 2016, the Brexit referendum resulted in a vote to leave the EU. On January 31, 2020, the UK actually left the EU. This is not the moment that Brexit was “done,” as Prime Minister Boris Johnson promised in his election campaign in December 2019; this was, in fact, the moment it began. “Getting Brexit done” means arranging for proper trade deals and other deals with markets all over the world, especially with the EU. The EU obviously wants to have good agreements with its largest neighboring market, and so does the UK. But in doing so, there should be some sort of level playing fields.
As an example of how that works, let’s take a look at food production: if British food producers want to have easy access to the EU market, the UK cannot open its back door to food or food substances that would not be allowed on the EU market. If that were to happen, it would require additional evidence to be provided by UK food producers to show that their products were not affected. Of course, this can all be accomplished from a technical and organizational point of view, but the economics of it are another point. UK negotiators promised to take care that UK food standards would be equal to EU standards, but they were not prepared to adopt future EU legislation in the UK. Still, EU negotiators were prepared to accept that promise, but just to make sure they would be able to prevent EU citizens being exposed to substandard food, they built in a safeguard clause: this “gentlemen’s agreement” could be withdrawn unilaterally by the EU. For the UK negotiators that meant they would still be subjected to EU law in an indirect way, which was considered unacceptable. As a result, there is still no agreement on this point.
The interesting thing is that UK medical device manufacturers must obey EU legislation if they want to distribute their products there, even up to the level of EU Notified Bodies performing audits on UK territory. For medical devices there will be a level playing field when it comes to safety and performance.
Of course, there is also a political component. The current government was elected with a solid majority and promised a quick Brexit. Extending the transition period would situate the UK in a halfway position where they would pay for the EU and be subjected to EU law and the European Court, all the while not having a say in these rules. This would limit their ability to make their own laws and create their own opportunities. It is understandable that they would prefer a different situation. On the other hand, they still have full access to the EU market and there are no issues with importing goods. Taking everything into account, the British government thought it was best for their citizens to prepare for leaving by December 31.

The agenda for the coming months

Negotiations on the future agreement between the EU and the UK will continue over the coming months. This may result in something acceptable for governments and parliaments on both side of the Channel/North Sea. The process of getting this agreement signed in time takes a few weeks, which means that it should be ready no later than November 26. A subsequent agreement would also be possible, but then it would be unavoidable that there would be some sort of trade barrier between the EU and the UK starting on January 1, 2021. Even a “free trade” deal would still create a barrier at the border. “Free trade” in this context means nothing more than “no tariffs, no quotas.” A “no deal” situation would be worse.
A European Council meeting is planned for December 10-11, and this could offer a final attempt to prevent the UK from having to rely on WTO rules for trading with the EU. Even so, other meetings can be called, later deals can be drafted, and anyone can try pulling a rabbit out of a hat. The problem is that with the COVID-19 pandemic raging on, there is little room for informal, one-on-one, conversations in Brussels or London hallways in which concepts can be tested before they are presented in official meetings. These “back room talks” are often necessary in order to make personal connections or to bridge cultural gaps.

How to prepare

In the past we have seen that, when balancing on the edge of the cliff, the UK does not jump and the EU does not push. So it looks fairly certain that there is not going to be a “no deal” situation on January 1. Yet we can’t be sure. By now many lifelines have been used, and the UK is running out of options. Any extension depends on the agreement of all 27 remaining Member States. Some may have their own agendas: for example, Spain has already negotiated that Gibraltar will not automatically follow all agreements between the EU and the UK. December may be an interesting month in which to see what other compromises can be reached.
In 2018 and several times in 2019, Emergo by UL warned readers to prepare for a hard, no-deal Brexit. Many companies have acted accordingly, which means that Brexit has already been happening. But still there are companies that rely on cross-Channel supplies of critical raw materials or components. They have a bit more time to take preparatory measures like building stock or contacting other sources of supply. Of course, companies can hope for a last-minute solution that would prevent a no-deal situation. So far this approach has been successful, but these companies are gambling on UK and EU leaders being able to change the current course of events. This may one day come to an end.

Related UK medical device regulatory resources from Emergo by UL:

• Brexit transition consulting for medical device and IVD companies
• Whitepaper: How medical device companies can prepare for a no-deal Brexit
• Whitepaper: How to select or change your Notified Body
• Webinar: Impact of a no-deal Brexit

Original Article: (https://www.emergobyul.com/blog/2020/07/brexit-update-no-extension-transitional-period)