On January 31 2020, Britain left the European Union after a long and complex process. Our policy team have answered some of the key questions asked about Brexit.
What has happened so far?
The UK Government held a nationwide referendum on 23 June 2016, asking voters to decide whether they wished to remain in or leave the European Union. The UK voted in favour to leave, with a result of 52% to 48%.
Since the referendum, the UK Government sought to develop a Withdrawal Agreement – the terms on which the UK would leave the EU. Theresa May agreed a deal with the EU on the terms of the UK's departure. It included how much money the UK must pay to the EU as a settlement, details of the transition period, and citizens' rights. It also covered the so-called "backstop", which ensures that no hard border exists between Northern Ireland and the Republic of Ireland after Brexit.
After it was voted down three times and Mrs May resigned, Boris Johnson negotiated changes to the withdrawal agreement where the backstop was replaced with a new Northern Ireland proposal. The arithmetic in Parliament and the Government’s shrinking majority meant Mr Johnson was unable to pass his deal through the House, until he called a December election, where he secured a majority of 80 seats. The Bill was then voted through in January.
The UK left the European Union at 23:00 on 31 January 2020, officially commencing the start of the transition period – a window for the Government to renegotiate its future relationship with the EU and negotiate new trade deals with other non-EU countries.
Why did Brexit take so long?
There are a number of factors that contributed to the length of time it took for the UK to leave the EU:
- This is the first time that a member state has left the EU.
- The arithmetic in the previous Parliament made it hard for Government to pass any legislation on Brexit, largely because it was so divided.
- The previous Government – led by both Theresa May and later Boris Johnson – both had diminishing majorities, which again made it hard to pass legislation.
- There are numerous laws that will need to be translated from EU statue books into UK law.
- For those laws that the UK does not wish to follow anymore, it will need to determine how it wishes to draw up its own rules and regulations on certain issues.
- It’s extremely complicated!
FAQs about the Brexit deal
What is the Brexit deal?
The 'Brexit deal' is an international treaty that makes it legal for the UK to leave the EU. It consists of the 585-page Withdrawal Agreement that Theresa May agreed between the UK and EU - plus 64 pages of amendments from Boris Johnson to change rules on Northern Ireland. It governs the very complicated process of becoming the first country ever to leave the EU - disentangling the nation from thousands of EU laws built up over decades. That deal has now been passed into law by the UK Parliament (through the Withdrawal Agreement Bill) and European Parliament.
What is in the deal?
The deal is designed to ensure there aren't any legal gaps when EU law automatically ended on Brexit day. Most importantly it created a 'transition period', which extends all EU laws until 31 December 2020 while the UK and EU negotiate a permanent trade deal. The Brexit deal dictates that this transition period could be extended by two years, but the Prime Minister decided to make that part illegal when he translated the deal into UK law.
The deal also includes guarantees on the rights of EU citizens who are already here to stay, with a new 'independent monitoring authority' to ensure their rights are upheld. EU citizens can continue arriving in Britain until 31 December 2020 (and vice versa) but must then apply for "settled status" in order to be able to stay.
Meanwhile the deal lays out the framework for a £39bn 'divorce bill', paid from the UK to the EU over several decades (most of it near the start) to cover outstanding commitments between both sides.
Will the UK leave with a deal?
There is no guarantee a deal can be struck in time. However the Government is optimistic that it will be able to secure an agreement with our European partners. Some commentators have suggested that a small number of trade deals will be secured on some but not all goods or services, in order to demonstrate progress, which would then pave the way for a further extension to negotiations on the more complex trade issues. The only certainty is that there are many months of negotiation ahead.
What needs to be agreed?
The UK Government’s priority is to secure 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.
Both sides will also need to decide how far the UK is allowed to move away from existing EU regulations (known as ‘equivalence’ versus ‘divergence). However, a free trade deal will not eliminate all checks between the UK and EU, so businesses will need to prepare accordingly. In 2018, total UK trade (goods and services) was valued at £1.3 trillion, of which the EU made up 49%.
FAQs about the transition period
What is the transition period?
The transition period is intended to allow time for the UK and EU to agree their future relationship. The UK will have no say in the making of new EU laws during the transition but will have to follow all EU rules, including freedom of movement. The transition is due to last until 31 December 2020 and could be extended by up to two years if both the UK and the EU wanted.
Will the transition period be extended?
The Prime Minister has ruled out any extension to the transition at present.
What happens at the end of the transition period?
At the end of the transition phase, there will be three possible Brexit outcomes:
1. A UK-EU trade deal comes into force
If a UK-EU trade deal is ready by the end of the year, the UK could begin the new trading relationship as soon as 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 used for other parts of the relationship.
2. 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.
3. The transition period is extended while negotiations continue
If a trade deal is in sight but not finalised, Prime Minister Boris 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 were to be 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 legislation passed by Parliament rules out an extension to the transition period, and Mr Johnson has also said he will not sanction one.
What happens next?
How will Brexit affect me?
Form 31 January 2020, passports, visas, healthcare, driving and trade in and with EU will remain more or less as they are now during the transition phase. The success of the trade talks and whether the UK and the EU can agree a free trade deal will determine the impact of Brexit post 31 December 2020.
Michel Barnier, the EU’s chief Brexit negotiator, has made clear that not everything can be addressed in the time remaining before the transition is set to expire, and that in some areas the EU can adopt stop-gap measures. He has given examples, including air and road transportation, where the EU can simply grant temporarily permissions to Britain so that things continue as normal. The core trade deal may also be complemented by further agreements after 2020, notably in the area of services, which are so vital to the UK economy.
How will regulation change in a post-Brexit Britain?
The UK will now need to transpose (or rewrite) any former EU regulations and laws that it once had to abide by into UK law. Many of these laws will be carried across to the statute books unchanged. However, there are several areas where the UK Government will seek to amend, reform or remove certain laws. Financial services regulation is one of the main areas up for debate given that some many of the laws and rules dictating our financial system were drawn up in Brussels.
What is the global context?
Following Brexit Day, the UK is now free to strike new trade deals for selling goods and services around the world, in addition to the one it is trying to secure with the EU. While it was an EU member, the UK was automatically part of around 40 trade deals the EU had struck with more than 70 countries. The UK has been trying to copy these arrangements. So far, 19 such deals, covering 50 countries or territories, have been rolled over. These deals represent just over 8% of total UK trade.
The following deals are expected to take effect at the end of the transition period, according to the Department for International Trade: Kosovo (£8m of trade in 2018); Jordan (£448m in 2018); Morocco (£2.5bn in 2018); Georgia (£123m in 2018); Southern African nations (£10.2bn in 2018); Tunisia (£542m in 2018); Lebanon (£762m in 2018); South Korea (£14.8bn in 2018); Central America (£1.1bn in 2018); Andean countries (£3.4bn in 2018); Caribbean countries (£3.7bn in 2018); Pacific Islands (£163m in 2018); Liechtenstein (£146m in 2018); Israel (£4.2bn in 2018); Palestinian Authority (£41m in 2018); Switzerland (£32.4bn in 2018); The Faroe Islands (£252m in 2018); Eastern and Southern Africa (£2bn in 2018); Chile (£2bn in 2018).
The government says it is still in negotiation with a further 16 countries, including Canada and Mexico.
What is the timeline?
1) Brexit Day – May 2020
The first round of negotiations began in the first week of March 2020 after the EU was able to agree its negotiating mandate – the terms of which the EU27 intend to work around when discussing a new trade deal. Trade talks will continue for the next few months.
2) June 2020
An EU-UK political declaration, agreed as part of Boris Johnson’s Brexit deal, says a summit should take place in June so Britain and the EU27 can assess the progress of the talks. June is also the final month for Britain to request an extension of its transition period beyond 2020, something Mr Johnson has pledged not to do.
3) 1 July 2020
The political declaration that forms part of Mr Johnson’s Brexit agreement with the EU commits both sides to seek a deal by this date on access to UK fishing waters for European fishermen. The issue is of crucial importance to eight coastal states, among them France, and EU leaders have made clear that trade talks will stop unless there is a deal. The two sides also have a target to reach decisions on access to each other’s financial services markets by this date. Brussels sees this as another source of leverage in the talks, given the importance of the City of London to the UK economy.
4) 26 November 2020
EU officials say that a trade deal must be negotiated, checked, translated and presented to the European Parliament by this week if it is to be ratified by the end of the year. MEPs will be in Strasbourg in the final week of November for their penultimate plenary session of 2020. The final one, in mid-December, would come too late to sign off on any deal with the UK. EU negotiators note that, in practice, this leaves only about six months to actually politically negotiate with Britain.
5) 31 December 2020
This is the cliff edge. If a trade deal has been struck, then the UK will transition in to its new trade relationship with the EU on 1 January 2021. If a trade deal is not in place, then Britain will fall back on to basic World Trade Organization terms, meaning tariffs on goods and little practical co-operation to smooth border checks. The outcome would effectively be the same as a no-deal Brexit and both sides would need to make preparations for how they cope with the economic fallout in 2021.
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