The United Kingdom left the European Union behind on Thursday, 48 years after joining the bloc, a major shift in the world order that will also bring major changes to ordinary Britons.
On January 1, decades of trade with the European Union that is not burdened by tariffs and regulatory hurdles will cease, one of several changes that are likely to have significant and lasting effects on the British economy. The rights of a British citizen to live, work, or study in any other EU member state would also diminish, highlighting the extent to which the European Union has access to the daily life of its citizens. EU citizens would also lose these rights in the United Kingdom
To supporters of Brexit, including the prime minister
Boris Johnson, These costs are justified Benefits and opportunities That exit from the European Union would bring. They say the departure would allow the UK to boost British trade with the rest of the world and put in place laws to shape its economy and society without interference from Brussels.
Johnson said on Wednesday: “Brexit is not an end but a beginning and it is now all on our shoulders to make the best use of the powers we have restored.” During the discussion On the Free Trade Agreement between the United Kingdom and the European Union in Parliament.
The an agreement Reached Christmas Eve between London and Brussels regarding the terms of their future relationship, it came to more than 1,000 pages, covering areas as diverse as hunting rights and cooperation between law enforcement agencies.
However, some key areas of the UK’s post-EU arrangements with its neighbors are not yet complete, in particular The long-term basis for trade in financial services And the exchange of data across borders. The UK is a strong exporter of the former, while the latter is one of the most important lubricants in world trade.
For companies, the most careful changes are January 1 He will feel the British exporters and importers who trade with the European Union. New procedures related to customs declarations and regulatory papers will take effect. Tariffs will not be imposed on trade in goods, but companies importing components from all over the world to produce goods for sale in the European Union will need to comply with the rules of origin, which specify the maximum amount of foreign input that the final product can contain to avoid tariffs.
The UK said it would give companies that bring goods into the UK a degree of leeway in enforcing the new rules to facilitate the passage of goods. The European Union did not provide any such guarantees, increasing the possibility of delays and disruptions to cross-border trade while the new arrangements are in effect.
Citi economists said in a research note this month that the disruption is likely to hurt economic growth, especially in the first quarter, and continue throughout the year. They said the effects were likely to be exacerbated by the pandemic, which has distracted UK company managers from making the necessary preparations. A November Bank of England survey of corporate executives found that only 40% said they were fully ready for January 1.
Overall, Citi estimates that the disruption will reduce the UK’s GDP in 2021 by about 2%, compared to what it would have been if it had stayed within the European Union’s single market, common regulatory area and customs area.
Service firms face similar, if not greater, challenges as of January 1. The UK-EU FTA only contained general provisions for trade in services across borders that did not match the level of access available in the single market, the Government Institute said in a report published after the deal was agreed.
The IfG Foundation, a non-partisan think-tank focused on policymaking, said UK service firms will also face domestic restrictions depending on laws that individual member states apply to non-EU companies. Professional qualifications will not always be recognized automatically, for example, and business travelers may need a visa to see clients depending on the length of their stay. Neither bar applies to professionals who are members of the European Union. Some services are strictly prohibited for non-EU providers.
UK citizens, for example, will not be able to sell actuarial services in Italy or construction services in Cyprus. They would not be able to be surveyors in Bulgaria or cigarette sellers in France, ”said an IfG report.
Most of the UK-based financial services firms, effective January 1, will no longer be able to provide services to EU clients, pending a so-called “parity” decision by the EU on the extent of market access that has yet to be made. However, the Bank of England said in November that banks, insurers and asset managers in the major UK had already set up EU-based subsidiaries to ensure their operations in the EU were not interrupted.
The UK Treasury has granted temporary permission to EU companies providing a range of financial services to UK clients, but the EU has only done the same to liquidate some financial assets through the UK exchanges. EU officials have said they cannot give any timeline to give equation to the UK’s financial services sector, although the two sides are supposed to conclude an agreement on cooperation on financial regulation by the end of March.
Data is another outstanding issue. Businesses will still be able to shuffle personal data electronically across UK and EU borders on January 1, for up to six months. The European Union said it will make a decision on whether UK laws meet its criteria to allow data transmission to continue in the first few months of 2021.
Brexit will change trade even within the UK to avoid the need to rebuild a customs border on the island of Ireland, Northern Ireland remains in place in the EU Single Market and Customs Area. This will require an increasing number of checks on products moving from the British mainland to Northern Ireland.
For British families, January 1st will bring changes as well. Tourists with a British passport will no longer be able to use the European Union Fast Track Lines with automatic gates at airports. Those traveling to European Union destinations will have the opportunity to shop duty-free – but will face new restrictions on the amount of alcohol they can buy. European Union restrictions will not apply to certain mobile phone charges, which likely means higher rates for international calls and messages.
British students will face higher fees and access requirements to study at EU universities. Pets, who can travel freely with their owners across the block under the EU Pet Passport Program, will need from January 1 to a vet to issue a clean health bill to enter an EU country.
Lawrence Norman in Brussels contributed to this article.
Write to Jason Douglas at [email protected]
Corrections and amplifications
The EU rules of origin specify the maximum amount of foreign inputs that a final product can contain to avoid tariffs. A previous version of this article incorrectly stated that the rules required a lower level. (Corrected December 31)
Copyright © 2020 Dow Jones & Company, Inc. all rights are save. 87990cbe856818d5eddac44c7b1cdeb8