The Brexit deal, or the UK-EU Trade and Cooperation Agreement (UK-EU TCA) has finally been reached, but what does this mean for UK Businesses?
After years of negotiations, the Brexit transition period ended on the 31st December 2020 and the UK finally left the EU. From this point, any UK business which trades with the EU now faces a new set of rules and regulations.
But what does all this mean?
Below, we have highlighted key areas of UK business affected by the 1,255 page UK-EU Trade and Cooperation Agreement (UK-EU TCA).
Although a relatively small industry, fishing was one of the biggest problem areas in coming to an agreement between the UK and the EU. Some compromise was reached, but it is not far enough to please UK fishermen who had hoped for more.
EU boats can continue to fish in UK waters, but their share of fish will fall 15% in the first year, and 2.5% for the four years after – much less than the government had aimed for.
It is estimated that the UK will be allowed to catch £140m more fish by 2026, after this there will be annual negotiations to decide what proportion of the catch each side gets.
Currently, the UK has the right to ban all EU boats from its waters, but the EU would retaliate by placing high tariffs on UK exports. As most of the fish caught by UK boats is exported to the EU, banning EU boats in UK water isn’t beneficial.
There are now quotas for individual fish, the previous system of quota swapping (which allowed UK boats to do deals with European counterparts) will end.
Foreign boats with a history of UK fishing can still access the 6-12 mile area from shore.
It was expected for there to be difficulties in negotiating in this area. UK financial services (such as banking, insurance, and asset management) are some of the UK’s most successful exports.
In the trade agreement, UK firms can provide their services across the EU. The difference to pre-Brexit being that each nation state can impose their own specific restraints on this matter.
So, although firms will immediately have to rely on their no-deal preparations, it is expected over the coming months there will be more guidance in this area.
If your business is in this industry, keep an eye out for change as the EU has reserved the right to withdraw decisions at 30 days’ notice.
UK qualifications which are currently recognised across the EU, will now be assessed on a nation-by-nation basis. This is likely to make it more difficult for Brits such as architects, engineers, accountants to provide client services across the border. So, if you’re planning to work in the EU, ensure your qualifications comply in the country you plan to work.
However, it’s not all bad news – in the future, a Partnership Council will draw up new qualifications which will be recognised in the UK and the EU.
This industry is important for the UK, and one that relied on Single Market access. Car manufacturers had concerns about their industry with no tariff-free access to the EU. This is a partial win, as this has been granted, but they hoped for much more.
The new customs declarations will mean a vast amount of time and money will need to be spent on administration.
The rules of origin are proved to be an area of difficulty in the agreement. They require a certain percentage of the parts to have been manufactured in the country which is exporting the product into the EU. The negotiations in this area has led to ‘full bilateral cumulation’. This means parts from both the EU and UK can count towards the origin percentage.
As a result of this, it is likely there will be more manufacturers looking to source parts from within the EU or they may consider relocating production. If the percentage quota isn’t met, it would lead to a tariff of 10% on exports to the EU.
On electric cars, the agreement has resulted in a six-year phase in for rules of origin, allowing 60% non-EU parts initially, before reducing to 55%, and then 45%. This is important as this sector is expected to see rapid growth. Currently, most batteries are sourced from Asia, therefore UK car manufacturers will need to begin battery production to support the growth of the industry here.
Food and Farming
Although a no-deal Brexit was avoided, farming businesses knew they would still face losing EU subsidies. Not only do they have this challenge to contend with, but they must also now incur extensive checks on their exports. All animal products will be subject to the strictest sanitary and phytosanitary (SPS) rules.
This is a concern for farmers, as the British Meat Processors’ Association states it costs £300 to have each load certified as safe. Again, leading to time and money being spend on administration costs.
A positive is that there is a new Trade Specialised Committee on Sanitary and Phytosanitary – meaning there is the future prospect of a more streamlined process.
So, although some issues have been clarified through the UK-EU TCA, it’s clear that through the coming weeks, months, and even years, that more specific guidelines will be provided across all sectors.
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