In December, the EU agreed that ‘sufficient progress’ had been made on phase one negotiations and we could proceed with phase two – the future relationship.
As we enter 2018 we explore what was agreed, what is to come and what it means for your business.
What was agreed in the phase one negations?
The EU and UK have now reached agreement on the basic ‘divorce’ settlement, including:
Assurance for EU citizens working in the UK and their employers.
EU citizens in the UK, and UK citizens in the rest of the EU, plus their children and partners, have the right to stay. There is likely to be a process of applying for 'settled status' – we expect further details in the coming months.
Further assurances that there will be no hard border in Ireland.
The agreement provides the basis for further discussions – though the document is clear that the principles of the Good Friday Agreement will be upheld. There is still a lot to work out before we have a clear plan for the border which organisations can action.
While no figure is agreed, a formula for calculating how much the UK will have to pay has been agreed. The UK will continue to pay into the EU budget as normal in 2019 and 2020.
What comes next?
The first step is to incorporate the progress made in December into a legal agreement. Once complete, negotiations can formally move onto phase two: agreeing a transition period and principles for a future UK-EU trade relationship.
The basis for an agreement on ‘transition’ is fairly clear: a two-year period from March 2019 during which the UK will be in the EU ‘in all but name’. This includes continued membership of the single market and customs union, which should give businesses greater certainty in the short to medium term. The earliest we are likely to see an agreement on transition arrangements is March - but this may well slip.
Negotiations on the future UK-EU trade relationship are unlikely to start until March 2018, with the EU requiring further clarity on what the UK wants before beginning discussions. This leaves very little time to agree the most difficult part of the negotiations. The EU has already made it clear that they will not be able to agree a full detailed trade agreement with the UK before ‘Brexit day’ in March 2019. The talks in 2018 will seek to agree a broad framework and set of principles for future UK-EU trade; the details will then need agreeing after March 2019.
What does this mean for your business?
The key questions for business are:
What is the future UK-EU relationship?
What transitional arrangements will be agreed to take us towards this?
Until these are agreed we advise you to plan for the scenario with the most change – a chaotic/hard Brexit in March 2019.