Now that the UK has officially withdrawn from the European Union, what will our legal and financial relationship be?
EU Flags at the European Commission. Photograph: Guillaume Périgois
The UK officially left the EU on 31st January 2020, but the Withdrawal Agreement set a transition period that ended on 31st December 2020. Now that this period has lapsed, EU regulations only apply in UK domestic law due to the EU Withdrawal Act 2018. EU treaties and other principles no longer apply in relation to the UK.
When it comes to finances, especially matters concerning trade and commercial agreements, the EU and the UK have negotiated and agreed on the Post-Brexit Trade and Cooperation Agreement. This has been binding since 1st January 2021 and is only provisional. This agreement provides free trade in goods and services, and discusses cooperation mechanisms in a range of other areas, such as movement of persons, transport and fisheries. However, the essential points to take away from the agreement are: no tariffs or quotas on imports of the EU into the UK or vice versa, visa-free entry rights (from the UK to the EU and vice versa for certain work purposes) for up to 90 days in a period of 180 days, and terms concerning financial services.
Financial services are economic services provided by the financial industry. They cover a wide range of wealth management businesses, including credit unions, banks, credit card companies, insurance companies, accounting companies, consumer finance companies, stock brokerages, investment funds and some government-funded enterprises. In terms of financial services, the TCA (Trade and Cooperation Agreement) states that ‘UK firms can no longer exercise EU passporting rights to provide services in the EU’ (and vice versa). It also states that there will continue to be free movement of capital between the UK and the EU. Moreover, the UK will no longer take part in trade agreements between the EU and third party countries. These types of agreements and relationships will have to be re-established.
Equivalence applies when third countries’ frameworks (in this case, the structure/ organisation/ rules or ideas concerning trade) are deemed to be equivalent to those of the EU. This is relevant because now that the UK is not in the EU, it will receive equivalence in the market access if the UK market has similar outcomes and intentions to the EU market in relations to trade, which it most likely will. Not all financial services will be covered by this, for example, banking services. These services will have to be negotiated separately in bilateral agreements (or side deals). This is a big factor in why the UK will be in a similar position to the positon it was in when it was a part of the EU, in terms of financial services and the market in general.
To sum up, even if the Post-Brexit negotiations about the future UK-EU relationship have not specified too much on this matter, it is clear that the UK’s withdrawal will have important consequences. It will be more difficult to make trade agreements with the EU and other countries, and in general to reach any agreement concerning finances. However, it is true that the TCA, the EU Withdrawal Act and the principle of equivalence makes it easier for the UK to be in a similar position to the one it was in, pre-Brexit with the EU. The most affected areas of the economy will be the secondary and tertiary sectors, specifically those trading, involved in the movement of goods/people and finances. When it comes to the Irish border, it will not be a hard border, so the trade will not change too much on that aspect either. In general, there does not appear to be too much change, and certainly not at any drastic rate, many negotiations still have to be made.
By Tania Verdú Marco, English and European Law LLB Student at Queen Mary University of London.