The UK is over half-way through the status-quo transition period that began when it left the European Union (EU) on 31 January 2020, with only months to go before it leaves the structures of the single market on 31 December 2020.
The end of June was an important milestone in the transition period. Under the Withdrawal Agreement, it was the last chance for both sides to agree an extension. Under the Political Declaration, it was also the date targeted for equivalence assessments in financial services to be undertaken and future fishing quotas to be agreed for the new relationship.
With no extension requested, the UK will be outside the EU single market on 1 January 2021. The negotiations are believed to be stalled on four big issues: fair competition in trade, governance, fisheries and security.
While both sides are now in intensive in person negotiations, it is difficult to see there being time for a deal to be struck before October. There are even hints from the UK Government that it might walk away from the talks if no progress is made in order to dedicate resources to preparing for life outside the single market.
For the financial services industry, there is at least some certainty. Passporting will end on 31 December, to be replaced with third-country rules, or at best, equivalence. Free movement of people and guaranteed data transfers will end. What is unclear is whether there will be any UK/EU agreements providing access over and above those prescribed by the WTO and the EU’s standard third-country treatments.
Regardless, 1 January will mean significant changes. Structure and strategy, access to customers and customer migration, data, mobility, access to market infrastructure, governance, and relationships with supervisors will be some of the big issue’s firms need to grapple with.