UK Politics

Brexit: What is the transition period?

Britain, Europe and exit text with flag on wooden signpost outdoors in nature, emergency sign to symbolise Brexit Image copyright Getty Images

Having secured a majority at the general election, Boris Johnson has said he will deliver on his pledge to leave the European Union (EU) on 31 January 2020.

That would lead to the UK entering an 11-month transition period to prepare for its new relationship with the EU.

And on 20 December 2019, MPs voted 358 to 234 - a majority of 124 - in favour of the PM's Withdrawal Agreement Bill, which now goes on to further scrutiny in Parliament.

What is the transition period?

Assuming the European Parliament also gives the green light, the UK will formally leave the EU on 31 January with a withdrawal deal.

But that will not be the end of the Brexit story.

The UK will enter a period, known as the transition, until 31 December 2020. Mr Johnson has said this date will not be extended.

Although the UK will cease to be an EU member, the trading relationship will remain the same and it will continue to follow the EU's rules, such as accepting rulings from the European Court of Justice.

The transition also means the UK will continue to contribute to the EU's budget for the duration.

The purpose of the transition is to enable a new wave of UK-EU negotiations to take place. These talks will determine what the future relationship will eventually look like.

Both sides have already outlined their broad aspirations, in a 27-page document known as the political declaration.

What needs to be done during the transition?

Top of the to-do list will be a UK-EU free trade deal. This will be essential if the UK wants to be able to continue to trade with the EU with no tariffs, quotas or other barriers after the transition.

Tariffs are a type of tax, usually paid on imported goods. If goods are subject to quotas, it means there are limits on how many can be traded over a given period.

However, a free trade deal will not eliminate all checks between the UK and EU. So businesses will need to prepare.

Last year total UK trade (goods and service) was valued at £1.3tn, of which the EU made up 49%.

Where does the UK trade?

% of total UK trade in 2018

Source: Department for International Trade

As well as negotiating a UK-EU trade deal, the transition will also allow the UK to hold formal trade talks with other countries - such as the US and Australia. If completed and ready in time, these deals could also take effect at the end of the transition.

The pro-Brexit camp has long argued that allowing the UK freedom to set its own trade policy will benefit the economy - although critics say it's more important to remain close to the EU.

Aside from trade, many other aspects of the future UK-EU relationship will need to be decided. For example:

  • Law enforcement, data sharing and security
  • Aviation standards and safety
  • Access to fishing waters
  • Supplies of electricity and gas
  • Licensing and regulation of medicines

The UK will also need to design and implement many new systems, such as how it will handle immigration once freedom of movement comes to an end.

What could Brexit look like after the transition?

Once the UK enters the transition phase, after 31 December 2020 there will be three possible Brexit outcomes:

A UK-EU trade deal comes into force

If a UK-EU trade deal is ready by the end of next year, the UK could begin the new trading relationship immediately after the transition ends.

While there is no guarantee a deal can be struck in time, the government is optimistic. The European Commission, on the other hand, has warned that the timetable will be extremely challenging.

If a trade deal is reached but questions remain in other areas - like the future of security co-operation - then the trade deal would go ahead. However, contingency plans would have to be activated for other parts of the relationship.

Image copyright Getty Images
Image caption Ursula von der Leyer has succeeded Jean-Claude Juncker and will head up the European Commission during the transition period

The UK exits transition with no EU trade deal

Under this scenario, UK and EU negotiators fail to agree and implement a trade deal by 1 January 2021 and no transition extension is agreed.

That would leave the UK trading on WTO (World Trade Organization) terms with the EU. This means that most UK goods would be subject to tariffs until a free trade deal was ready to be brought in.

If other aspects of the future relationship aren't ready, they too would have to proceed on no-deal terms.

The transition period is extended while negotiations continue

If a trade deal is in sight but not finalised, Mr Johnson could decide to extend the transition period (as long as the EU also agreed to it). Under the terms of the withdrawal agreement, the transition period is allowed to be extended by 12 or 24 months. If a trade deal was struck sooner, the transition period could be ended earlier.

The withdrawal agreement says the two sides need to agree to extend the transition by 1 July 2020 - just five months after the UK's departure.

However, this scenario seems unlikely as the legislation going through Parliament would rule out an extension to the transition period, and Mr Johnson has also said he will not sanction one.

Either way, while Mr Johnson has pledged to "get Brexit done" by 31 January 2020, many more months of negotiation now lie ahead.

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