Businesses welcome Brexit free trade agreement, but much detail yet to be agreed

Last updated 31 December 2020

The government has reached a free trade agreement with the European Union that will see zero tariff and zero quota trade between UK and European businesses.

The free trade agreement was agreed in a parliamentary vote by UK MPs on Wednesday 30 December, with European Governments given until 28 February 2021 to agree on the new trading arrangements. The proposed free trade agreement will apply on a provisional basis until that date.

Businesses, whilst still waiting on the practical detail and advice following the 1,246-page agreement, are expected to welcome the deal allowing them to move forward plans for 2021 with greater confidence. It will also help consumers too in terms of clarifying the cost they pay for goods and post-COVID European travel plans.

The free trade agreement will not however mean that our trading relationship with European neighbours will continue unchanged.

There will, from 1 January 2021, be a customs border with the need to make export and import declarations for movements of goods between the UK and EU and vice versa. There will be considerable complexity in achieving a nil duty rate as businesses will need to understand the origin for the goods rules.

VAT will still be due on imports, as will compliance obligations in EU countries to which goods are to be imported. Businesses will need to decide whether they wish to maintain current supply models with EU customers handling all aspects of delivery to their doorstep, including from 1 January 2021, being the importer into the EU.

Businesses will also wish to know if the agreement includes any simplifications in terms of legislation governing customs clearance matters, particularly if both sides will still insist on customs export or import declarants being established on either side of the channel.

We understand that these rules will still be applicable, meaning that in some cases UK businesses will need to set up an establishment in the EU, and EU businesses one in the UK.  Some businesses may also need both a UK and EU EORI number to clear goods through customs if they are both exporter and importer.

In the coming weeks, we will publish a series of more detailed briefings for businesses that explain the rules of the free trade agreement and the steps that will need to be taken.

In the meantime:

• Further guidance for individuals traveling to and from the EU can be found here
• Government guidance on the UK’s new arrangements with the European Union can be found here
• Government guidance on origin of goods rules can be found here