UK-EU Evolving Relationship Bulletin

Although the UK-EU trade agreement has been concluded, less than a month in, it has become clear that there are still many issues to resolve and many areas left for the UK and EU to discuss further. At Instinctif Partners we will continue to track the evolving UK-EU relationship and monitor major changes in regulations the UK may adopt post-Brexit on a fortnightly basis. We will also include in the bulletin other post-Brexit trade deals to keep you informed of the most important political and regulatory developments between the UK and the rest of the world going forward.

If you have any questions or requests, please contact jason.esi@instinctif.com

The EU has indicated it is prepared to open talks to ease post-Brexit border friction if the UK drops its plans to diverge from EU regulation  

• UK Business Secretary Kwasi Kwarteng has confirmed that the Government is looking at scrapping some EU labour laws but insisted there would be no “bonfire of rights”.
  • It comes as Prime Minister Boris Johnson held talks with business leaders about finding ways to cut red tape now that the UK has left the EU, and has made the Chancellor Rishi Sunak Chair of a new ‘Better Regulation Committee’ in Downing Street which is mandated to “making better regulation outside the EU, reviewing existing rules and cutting red tape for businesses”.
  • The UK is said to be considering reforming the 48-hour week and removing the requirement of businesses to log the detailed, daily reporting of working hours, which could save businesses £1 billion a year.
  • Meanwhile the EU has indicated that it is open to talks on freeing up trade and reducing border friction, but only if the UK doesn’t push forward with plans to deregulate.
  • Since the end of the transition, problems and delays at borders are increasingly affecting exports, with fish and meat sellers hit particularly hard. According to HM Revenue & Customs, businesses need to fill in 215 million import and export forms a year, costing firms £7.5bn.
  • European exporters are not facing similar problems because the UK gave the EU a six-month grace period allowing them to avoid new customs checks, in a move that was not reciprocated by EU.
  • Measures that could be discussed between the EU and UK include improved customs facilitation to end delays for perishable goods such as fish or to prevent shipments with the wrong paperwork being blocked.
  • Another move could be to extend the grace period on health checks for chilled meat products such as sausages into Northern Ireland.
  • The EU has also indicated that the door was open to easing the ban on British travellers taking meat or cheese sandwiches into Europe after footage of EU customs officials confiscating packed lunches was posted on the internet.

The EU has refused to renegotiate the grace period for food imports into Northern Ireland

• Under the Withdrawal Agreement, products shipped from Great Britain to Northern Ireland will need export documentation, including a separate Northern Ireland CE marking arrangement to demonstrate conformity with the relevant technical requirements. Goods from GB to NI must also be certified.
  • Companies also have to demonstrate the originating status of goods for them to be entitled to preferential treatment under a possible future EU-UK agreement. Goods not meeting origin requirements will be liable to customs duties (the complexity of supply chains can mean that proof of origin can be difficult for traders to supply and hard for authorities to assess).
  • None of these checks apply to goods moving from NI to GB, and in December a six-month grace period was agreed between the UK and EU on health checks for chilled meat products being imported this way.  A three-month grace period for all other food suppliers selling into the province’s supermarkets and corner stores was also agreed.
  • The UK had wanted to agree a long-term permanent solution to the issues during the grace period, but now it seems the EU have ruled that out over concerns about UK plans to potentially diverge.
  • Former chief EU negotiator Michel Barnier said that now is the time to implement the Withdrawal Agreement and trade deal, rather than begin new negotiations.
  • It comes after the chief executives of Tesco, Sainsbury’s, Asda, Iceland, Co-Op and Marks & Spencer have all written to Cabinet Office Minister Michael Gove to voice their concerns. They warned him that if further new certification requirements are introduced in April, the system will become “unworkable”.
  • The Government has said they have already set up a dedicated team to work with supermarkets, the food industry and the Northern Ireland Government to streamline the system. However, NI supermarkets are making clear that they need assurances that the current process (a temporary trusted trader system) will not change until a workable replacement is agreed.
  • The UK is confident that the EU will eventually work to limit friction for goods from GB to NI, as under the terms of the Withdrawal Agreement, the Northern Ireland Assembly will have a vote on whether to leave the Protocol in 2024, and it’s possible they’ll vote to do so if the Protocol proves too disruptive to lives and businesses in Northern Ireland.

There are reports that the EU will seek an extension to the deadline by which the free trade agreement with the UK must be ratified

• Several member states are insisting on the deadline being pushed back to April instead of February in order to give the European Parliament and member states time to scrutinise the deal, as well as have it translated into 23 official languages.
  • The treaty is currently being provisionally applied and will only be formally ratified once the EU Parliament gives its consent.
  • Member states are pushing for this as they want time to gain a greater understanding of the governance aspect of the deal, specifically in relation to circumstances where retaliatory action can be taken if there is a breach of the level playing field.
  • Member states also want a more active role in deciding if there has been a breach, despite the European Commission traditionally monitoring trade agreements.
  • Meanwhile, Maroš Šefčovič will be the EU’s representative on the new Joint Partnership Council (JPC) which will manage the new relationship. Mr Šefčovič is already the EU chair of the Joint Committee which has been overseeing the implementation of the Brexit Withdrawal Agreement, including the Northern Ireland Protocol.
  • It is also understood that there is a sense of urgency to get the JPC up and running in order for the EU to seek approval from the UK to extend the period of provisional application.
  • Meanwhile EU ambassadors are set to discuss this week how the trade agreement functions, in particular a “joint partnership council” to review problems.

Other post-Brexit news

• The French Government have stated that UK citizens travelling to Europe to work for up to 90 days would not require visas and that temporary work permits would not be required for “sporting, cultural or scientific events.” It comes after performers expressed concern at the lack of a Mobility Chapter in the UK-EU trade deal which could have required touring groups to get complex work permits — which differ from EU nation to EU nation — in order to perform. However roadies and trucks that drive performers on tour may still fall foul of the limited pick-up and drop-off rules — so-called cabotage — that are included in the deal.

• Mairead McGuinness, the EU’s Commissioner for financial services, has warned the UK against deregulating the City of London or introducing “light touch” financial rules after Brexit. She said she would not grant equivalence for 28 sectors until the UK gave more details on how far it planned to diverge from EU rules. The EU are currently looking at plans to bolster the international role of the Euro and reduce dependence on financial centres such as London. The EU has granted UK derivatives clearing houses and central securities depositories temporary equivalence because it believes that will help safeguard financial stability.

• The UK and EU are caught up in a diplomatic row over the status of the EU’s ambassador in London. The UK is refusing to give Joao Vale de Almeida the full diplomatic status that is granted to other ambassadors. The UK Foreign Office argue that they don’t want to set a precedent for treating an international body in the same way as a nation state. The British decision is in marked contrast to 142 other countries around the world where the EU has delegations and where its ambassadors are all granted the same status as diplomats representing sovereign nations.

• Former EU chief Brexit negotiator, Michel Barnier will be taking up a new role as special advisor to oversee the ratification of the Brexit trade deal. The Commission’s Task Force for Relations with the UK, which Barnier led, will cease to exist on 1 March and will be replaced with a new service monitoring the implementation of the agreements with the UK. Barnier’s appointment will last until formal ratification of the trade agreement.

• The Government has unveiled a £23 million fund to compensate the fishing industry for losses caused by Brexit red tape after Scottish seafood hauliers descended on Downing Street to protest. The Prime Minister said that the pandemic was responsible for some of the losses citing reduced demand due to restaurants being shut.

• The UK’s final big industrial contribution to the EU’s Galileo sat-nav system has been delivered as the UK leaves the project. UK ministers are now seeking a home-grown alternative, with some suggesting the One Web satellite network recently acquired by the Government could be involved. Surrey Satellite Technology Limited of Guildford assembled all 34 “full operation” payloads of the system and built in rapid time the satellite that initiated Galileo.

• The UK and EU have agreed in principle that they should continue to cooperate on the space project Copernicus. They are yet to agree the exact terms of the UK’s involvement; what has been agreed so far would see the UK pay a subscription of roughly £710m over seven years, which would give it full access to Copernicus services and the ability for its companies to bid for industrial work.

• UK drivers are set to escape most speeding fines in the EU as the EU’s cross-border enforcement directive no longer applies, ending arrangements for sharing information about drivers caught on speed cameras. It means owners of British-registered vehicles will no longer be sent fines. France, which stands to lose up to 60 million euros a year, has said that it wants to negotiate a bilateral agreement with the UK to enable fines to be sent from one country to the other despite Brexit. French officials are said to fear that the UK will drag its heels.
• The Government has launched a Global Health Insurance Card. UK residents are now be able to apply for a UK Global Health Insurance Card (GHIC). Under the UK’s new agreement with the EU, UK residents’ rights to emergency and medically necessary healthcare will continue when travelling in the EU. This includes medically necessary treatment for a pre-existing or chronic condition. Current European Health Insurance Cards (EHIC) are valid as long as they are in date and people can continue to use these when travelling to the EU.