BREXIT is a Done Deal — What Happens Next?

By Zaid Al-Nassir, Decision Resources Group (DRG)

[Editor’s Note: This draft is updated through Jan. 31, 2020, and will be amended as Brexit progresses]

On March 29, 2017, the United Kingdom (UK) invoked Article 50 of the Lisbon Treaty, beginning the two-year process of leaving the European Union (EU), more commonly known as Brexit. Although the UK government and the EU first reached a deal on a withdrawal agreement in November 2018, British Members of Parliament (MPs) were not able to rally a majority to support a specific withdrawal arrangement until January 2020.

Because the government was, until recently, unable to secure parliamentary approval for a deal — and considering the UK was originally set to exit the EU on March 29, 2019, regardless of whether an agreement had been reached — MPs voted (and the EU agreed) to delay Brexit on three occasions between early March and late October 2019. Below, we provide an in-depth look into the events that followed each of those extensions and examine the transition period, plus its possible outcomes.

New Prime Minister

In May 2019, having repeatedly failed to unite parliament (and her own cabinet) behind a Brexit deal, Theresa May announced she was stepping aside as Conservative Party leader and Prime Minister, thereby triggering a race for leadership within the Conservative Party that would determine the next Prime Minister. Nearly two month later, Boris Johnson — a leading figure in the Brexit campaign and former Foreign Secretary in Theresa May’s cabinet who had resigned in protest at May’s Brexit approach — won the Conservative Party leadership ballot and was subsequently appointed Prime Minister by the Queen; shortly after, Johnson indicated that he intended to renegotiate both the binding and non-binding elements of the deal that Theresa May negotiated with the EU, and insisted that his government would leave the EU on Oct. 31, 2019, regardless of whether a deal had been approved.

Despite a lack of willingness among EU leaders to reopen the negotiation process on the binding withdrawal agreement and non-binding political declaration, Johnson defied expectations and managed to renegotiate both elements; on Oct. 17, 2019, he and Jean-Claude Juncker, President of the European Commission, announced a new Brexit deal that is distinct from its predecessor in its treatment of the so-called Irish backstop and the political declaration, but not much else.

However, Johnson’s plan to secure parliamentary approval for the deal by Oct. 19, 2019 —  the parliament-stipulated date (via the Benn Act) by which Johnson would be forced to request another extension from the EU if parliament hadn’t approved a deal — was scuttled when parliament voted to withhold its support for the new Brexit deal until the necessary laws to apply Brexit came into place in order to mitigate the risk of an inadvertent “no-deal” Brexit and provide MPs with more time to look into the new deal. This essentially forced Johnson’s hand to request an extension from the EU, the UK’s third Brexit extension request.

On Oct. 22, 2019, while the EU was still considering the UK’s extension request, Johnson continued to attempt to pass a Brexit deal by the Oct. 31, 2019 deadline. UK MPs voted in favor of Johnson’s Brexit bill in an initial debate on the overall principles of the bill (known as a second reading) — making this the first time parliament had backed any Brexit deal — but rejected Johnson’s fast-tracked timetable to finalize the deal by Oct. 25, 2019 on the grounds that they did not have enough time to consider specifics of the legislation.

Early Elections

In response, Johnson announced that he would place the legislation on hold until the EU responded to his extension request; yet, the EU indicated that it required more clarity surrounding the purpose and justification of an extension before granting one. On Oct. 24, 2019, attempting to break the impasse, strengthen his party’s position in parliament, and provide justification for an extension, Johnson called for an early election on Dec. 12, 2019, though it was uncertain whether he would be able to garner the requisite parliamentary support for an election, due largely to the opposition’s concerns surrounding the possibility of a “no-deal” Brexit.

However, on Oct. 28, 2019, the EU agreed to another “flexible” extension until Jan. 31, 2020, essentially satisfying the opposition (Labour) party’s request that the potential for a “no-deal” Brexit be eliminated. The following day, MPs supported Johnson’s call for an early election on Dec. 12, 2019. Parliament was dissolved on Nov. 6, 2019 in preparation for a general election.

The election outcome represented a major victory for Johnson and the Conservative party, providing them with a significant majority. Based on this majority, Johnson’s renegotiated withdrawal agreement was passed by Parliament on Jan. 22, 2020 and received royal assent the following day. Approval of the bill ensured the UK would exit the EU on Jan. 31, 2020, eliminating the possibility of a “no-deal” Brexit on that date. The European Parliament approved the UK-EU Withdrawal Agreement on Jan. 29, 2020, with 621 votes in favor, 49 against, and 13 abstentions.

Transition Period

Now that the UK and EU have approved a withdrawal agreement, a transition period — during which the future trade relationship between the UK and EU will be finalized — is in effect through Dec. 31, 2020. While there was some speculation this period could be extended if both parties agreed to such an extension by June 2020, the recently passed withdrawal agreement prohibits the UK government from seeking such a delay. However, should concerns surrounding the post-Brexit relationship between the UK and EU persist during negotiations, it is possible that this prohibition can be overcome through future legislation.

During this transition period, Marketing Authorization Holders (MAHs) based in the UK will continue being able to access EU markets; manufacturing and distribution licenses and inspections will continue to be mutually recognized in both regions. Moreover, UK-based firms will still be able to apply for marketing authorizations.

Furthermore, both UK and EU markets will continue to rely on CE marking, and UK-based firms will not be required to have EU-based authorized representatives. Notified Bodies in the UK may continue third-party conformity assessments, which will be recognized throughout EU markets.

Significantly, both the European MDR and the CTR are set to take effect during the Brexit transition period (prior to Dec. 31, 2020), reducing the potential for disruptive regulatory barriers between the UK and EU once the transition period has closed.

Possible Outcomes

Although the risk of a “no-deal” Brexit has been eliminated, the reality and full impact of Brexit will rely entirely on the outcome of post-Brexit negotiations that determine the future relationship between the UK and the EU, as well as the extent of trade and regulatory harmonization desired by each side.

One of the early and primary outcomes of these negotiations is anticipated to be a UK-EU free-trade agreement. However, if such an agreement is not negotiated by the end of the transition period (and the transition period is not extended), this relationship would automatically revert to World Trade Organization (WTO) trade rules — which would include tariffs and increased border checks — until a free-trade deal is reached. Because these outcomes remain uncertain, no assumptions regarding the overall impact of Brexit have been factored into this assessment.

About The Author

Zaid Al-Nassir is a senior product support analyst at Decision Resources Group. He holds a B.A. focused in Political Science, History, Writing & Rhetoric from the University of Toronto. Zaid can be contacted at zalnassir@teamdrg.com