On 31 December 2020 at 23.00 GMT, the transition period ended and it means the completion of UK’s departure from EU and termination of its membership of the Single Market and the EU customs unions. It means the end of UK’s enjoyment of the Four Freedoms under EU law, being free movement of (i) goods; (ii) services; (iii) capital; and (iv) workers. From 1 January 2021 the UK-EU relationship will be governed by a bilateral trade deal and not European Union law. In this note, we take a very high level look at the implications of Brexit and UK-EU trade deal in principle designed to provide your with an introduction to the subject matter only.
What are the Four Freedoms?
The purpose of the four freedoms is to encourage frictionless trade between EU member states and create an internal market also known as the Sing Market:
i) Free Movement of Goods
Free movement of Goods involves the removal of all the trade barriers between the member states (including tariff-based restrictions or different custom duties and restrictions on quantities imported or exported).
ii) Free Movement of Services (Right to Establishment).
A company established in one EU country it can sell services freely into other EU countries, without needing to establish a branch or subsidiary there. This is widely referred to as ‘passporting rights’.
iii) Free Movement of Capital
When a member state has access to the internal market, it has the ability to carry out cross-border transactions without any restrictions on capital transfers, such as opening bank accounts, investing in companies and etc. across all other EU member states.
iv) Free Movement of Workers
Any national of an EU member state has the right settle and work in another EU member state (with the same legal rights as locals). It makes it very easy for companies to recruit individuals for other member states as foreign employee will require no visa and working permit.
With the completion of the transaction period, the UK will not benefit from any of these rights which have existed for decades.
Brexit trade deal provisions and its implications
The UK-EU trade deal taking effect from 1 January 2021 will govern the relationship between the UK and the EU going forward and it does not address the free movement of capital, services and people across EU and UK.
Trade between UK and EU
Under the terms of the deal new border checks will be introduced and make trade more complicated but it appears to a large extent that movement of goods will continue to move relative smoothly with limited taxes and custom handling charges on goods and amounts that can be traded between UK and EU (with certain exceptions on certain UK animal food products). It seems the trade agreement prevents a situation that was widely feared being that prices on goods would significantly increase due to Brexit.
Services and Qualifications
UK Companies operating in services sectors such as banking, accounting and financial services would lose their automatic access to the internal market (referred as ‘passporting rights’) and will face some restrictions. Furthermore, professional qualifications gained in the UK such as doctors, architects will no longer be automatically recognised in the EU unless separate agreements are entered into between the UK and the EU.
The termination of the freedom of free movement of establishment and services for UK businesses and individuals means that those will need to comply with regulations in each individual EU state rather than following one set of rules for the whole of the EU. Additionally, individuals who has gained professional qualifications in the UK may find it difficult to provide their services in EU and they will need to ensure they comply with the individual rules in the relevant EU state where they propose to provide those services. We understand that the UK and EU are negotiating an agreement that would ease access to provide services cross-border.
Immigration and travel
As of 1 January 2021, all EU nationals who want to work in the UK will need to get work visas, and will be subject to the same immigration rules as nationals of the rest of the world.
Capital and Investments
The recent trade deal does not contain any specific provision on rules governing the subject matter of capital movements and investments. Going forward, UK investments and movement of capital in EU will be governed by the regulations of each individual EU member state.
Please note that this information is only for information purposes and does not constitute legal advice. As this area of law is complex, we would suggest that you seek legal advice for your specific matter. Redfern Legal will be happy to assist you.