January 2021 - UK completes formal separation from EU
At 23.00 on 31 December 2020, the UK began a new era outside of the European Union. Following the agreement of a trade deal, new arrangements for travel, trade, immigration and security co-operation have now come into force.
The UK officially left the bloc on 31 January 2020, three and half years after the UK voted to leave in the 2016 referendum. However, the UK had been subject to the EU's trading rules for 11 months until December 2020 while the two sides negotiated their future economic partnership. A trade agreement was finalised on Christmas Eve and subsequently voted through by the UK Parliament before finally coming into force before the end of the transition period.
Whilst the free trade agreement puts a number of difficult issues to bed after months of uncertainty, there are many outstanding loose ends that still require attention in the coming weeks and months.
For example, the UK is still waiting to find out what access Brussels is going to give its financial services to the single market. The Brexit trade deal does not include an EU-wide arrangement for financial services, with UK firms instead having to negotiate a patchwork of individual EU nations’ regulations. Negotiations on so called ‘equivalence’ measures will be led by the UK Treasury and will commence in January. Further information on the changes affecting the UK financial services sector can be found in this blog.
There are also questions over how the UK and EU will cooperate on addressing global challenges such as climate change. Furthermore, there is a review mechanism written into the treaty every five years which will ensure discussions over the UK’s relationship with and alignment to the EU will continue in the years to come.
Useful Brexit Links
The IFoA has been engaging with the UK Department for Business, Energy and Industrial Strategy (BEIS) to ensure that actuaries are prepared for all Brexit eventualities. BEIS provides the IFoA with regular updates and resources, and we have also attended numerous Brexit Readiness events, including forums on no-deal communication and the mutual recognition of qualifications.
The IFoA will be taking steps to mitigate any potential Brexit effects, and would encourage all members to make sure their places of work are aware of the need to do the same.
The Government has prepared a number of tools and resources to help people and businesses get Brexit ready, and the IFoA would encourage its members to take advantage of the available guidance:
- UK-EU Trade and Co-operation Agreement https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/948093/TCA_SUMMARY_PDF.pdf
- Gov.UK has a dedicated webpage for Brexit preparation, with resources for individuals and organisations https://www.gov.uk/transition
- The Government has also created a tool to check your Brexit readiness https://www.gov.uk/get-ready-brexit-check
- There is also a library of sector-specific briefings on how to ensure businesses and individuals are ready in the event of no-deal https://www.gov.uk/government/collections/how-to-prepare-if-the-uk-leave...
- For residents of British Overseas Territories also affected by Brexit, guidance is available from the UK Government via its main Brexit page. The Government of Gibraltar and the Gibraltar Financial Services Commission have also issued Brexit guidance https://www.gibraltar.gov.gi/brexit / https://www.fsc.gi/regulated-firms/brexit-info-firms
- IFoA Members living and working in non-UK EU states should also look for guidance issued by their Government on the effects of Brexit, and any actions they will need to take once the UK leave the EU.
- The IFoA’s Director of Public Affairs and Research, Annette Spencer, gave a presentation to the Casualty Actuarial Society on the “Story of Brexit” last year. View the presentation for a more in-depth analysis of the timeline and attitudes that influenced the UK’s decision to leave the EU.
- FCA Brexit Hub: https://www.fca.org.uk/brexit
- Letter from the PRA and FCA ‘Final preparations for the end of the transition period’: https://www.bankofengland.co.uk/prudential-regulation/letter/2020/final-preparations-for-the-end-of-the-transition-period-insurance-firms
- PRA Regulatory Digest (October): https://www.bankofengland.co.uk/prudential-regulation/regulatory-digest/2020/october
- The Pensions Regulator Brexit Information for DC and DB Schemes: https://www.thepensionsregulator.gov.uk/en/prepare-your-pension-scheme-for-brexit
- ABI Consumer Information on Driving and Travelling to the EU in the case of ‘No Deal’: https://www.abi.org.uk/products-and-issues/topics-and-issues/travelling-to-the-eu-in-the-case-of-a-no-deal-brexit2/
- Letter from the Business Secretary with regard to the end of the transition period.
Further information is being issued all the time, so remember to keep checking for the latest updates and guidance. Organisations wanting to keep up to date with the latest news and preparedness events from BEIS via the Brexit Business Readiness Bulletin can join the mailing list by emailing email@example.com.
For the IFoA and its members, the negotiations on the services sector will be of most interest.
According to its draft agreement, the UK is still pursuing an enhanced equivalence and regulatory cooperation regime for the financial services sector, proposing a Financial Services Committee with UK, EU and independent representatives to ensure the financial services chapter is respected. Although the proposal is embraced by the City, the EU is unlikely to accept any obstacles to its power to withdraw equivalence and believes these decisions should be unilateral and according to their own interests.
The UK draft agreement also seeks to enable UK financial firms to service in the EU market and vice versa. Importantly, according to the terms provision of services depends on how each party defines ‘doing business’ and ‘solicitation’, which may create barriers along the way.
Facilitating free trade in services requires the removal of non-tariff barriers. Free trade agreements only cover services lightly and the single market itself is not as open for services as it is for goods. At present, firms based in any member state are able to enjoy: the discharge services in other member states, the freedom of establishment, mutual recognition of qualifications and regulatory bodies, free flow of data, freedom of movement and effective enforcement.
Without a deal however, UK firms that want to trade in services would have to comply with a mix of regulatory regimes, with many of those that can afford it already setting subsidiaries in EU member states. Losing access to the EU markets would affect service providers from the UK differently depending on the member states in which they operate or used to operate in.
One of the main sticking points that resurfaced in the last round of negotiations was around mobility for professionals discharging their services in the EU market, with the EU concerned that the UK wanted ’almost’ freedom of movement. This is an issue that would affect legal services and business consultants for instance.
In addition, on professional qualifications, the UK has been asking for more than the EU has offered as part of previous EU free trade agreements with Canada and Japan, pushing for mutual recognition to be considered as the default. The EU instead wants UK qualifications to be governed by the national policies of the member state.
The IFoA’s policy and public affairs team will continue to monitor the negotiations to ensure members can keep abreast of developments as and when they happen.
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