UK-EU future relationship: EU preparations

The information in this explainer details the situation at the time of publication and does not reflect possible recent developments.

Why is it so important that EU countries prepare?

The Brexit transition period will end at 11.00pm on 31 December 2020. Practically speaking, the UK will formally leave the EU’s single market and customs union and will begin trading with the EU on radically different terms – although special arrangements have been carved out for Northern Ireland through the Northern Ireland Protocol.

Both governments and businesses need to get ready for the change: EU traders will need to fill in new paperwork to export to Great Britain and be ready for lengthy checks at the border (and vice-versa). Preparation will be key to minimise disruption and avoid unnecessary delays at the border.

What is the EU Commission doing to help EU governments and businesses prepare for the end of transition period?

The Commission is coordinating member states’ responses to Brexit. EU negotiators are in regular contact with member-state governments and business groups and associations, like Business Europe and have set out guidance to help them prepare. However, the bulk of preparation itself falls to EU governments and businesses.

The European Commission published over 80 “readiness notices” that set out the legal consequences of the UK’s departure in a number of areas. They outline what EU businesses need to do to continue exchanging goods and services with the UK after the end of the transition period. For example, there will be new rules on imports of animal and plants products from Great Britain and businesses will need to declare VAT. Most of these rules will apply regardless of whether the UK leaves the transition period with a deal or not. The Commission has also produced a detailed checklist to help individual businesses’ preparations.

Some of the Commission’s guidelines are also directed at UK traders (in particular, traders based in Great Britain) looking to export to the EU after the transition period. To be sold in the EU, some products must hold the ‘CE product standards’ trade mark, to show that they conform to the EU’s required safety standards. After the transition period, the EU will no longer automatically recognise conformity assessments carried out by specialised bodies based in Great Britain. GB-based companies may therefore need to have their existing certifications transferred to an EU conformity assessment body, or have their products recertified in the EU. Firms may also need to set up a presence in an EU member state to be able to use the EC trade mark. They will also need to notify the European Union Intellectual Property Office.

The Commission’s notices are dense and legalistic – so many EU governments and business associations have put together their own guidance to aid smaller EU businesses exporting to the UK.

What are member states doing to prepare for the end of the transition period?

The burden of getting ready for the end of the transition period falls on individual member states and their businesses. Most member states stepped up their Brexit preparations ahead of a possible no deal exit in 2019. For example, the Danish government had budgeted a total of 49 million kroner (over £5 million) to support companies in the event of a no-deal Brexit in 2019. This included support for new paperwork and to meet new border requirements. Some have been preparing for even longer. Mark Dijk of the Port of Rotterdam said preparations started in 2017, while Jean-Marc Puissesseau of the Port of Calais said they began planning in 2018.

Today, every member state has a dedicated Brexit page on their government website, though they have adopted different communications strategies to ensure their businesses prepare for the changes that are coming – with those more exposed to the consequences of Brexit, like Ireland, Belgium and the Netherlands, tending to be more actively preparing. Other member states simply refer businesses to the Commission’s notices.

In many countries, the outbreak of Covid-19 has reduced government bandwidth to deal with Brexit, resulting in far less activity and in smaller dedicated communications campaigns compared to 2019.

What communication plans are in place for preparations?

Unsurprisingly, those member states closest to the United Kingdom have developed the most comprehensive communication plans. These include Belgium, Ireland and the Netherlands. France has also got a detailed explanation of the new customs requirements that will apply on 1 January 2021.

Ireland’s “Getting Ireland Brexit Ready” campaign provides sector-specific advice. In September 2020, the government of Ireland published its “Brexit Readiness Action Plan” which provides a comprehensive overview of the action required by businesses and government for trading with the UK after the transition period. This includes details of the economic support available to businesses – such as the €20 million made available for businesses affected by Brexit in their July Jobs Stimulus – and information on infrastructure and contingency planning. It also has practical information about new customs requirements,  such as how to acquire an EORI number, and advice on how businesses should respond other changes, such as the likely end of the ‘passporting’ of financial services.

The Netherlands has continued to encourage business to prepare for the end of transition with its Brexit Impact Scan - a platform that identifies the specific impact of Brexit-related changes to individual businesses, public-private initiatives such as "Brexit buddies" and using a ‘Brexit muppet’ in the public communications campaign.

The Belgian government has a website page dedicated to the changes after the end of the transition period – with a detailed step-by-step guide for traders. It also has a check list and a Brexit toolkit for businesses to determine what preparations they need to put in place to continue trading on 1 January 2021.

Some EU governments, like Finland and Estonia have set up hotlines for any Brexit questions, but it is not clear how frequently businesses and citizens use them.

How have member states prepared for new customs processes and border checks?

France, Germany, Ireland, the Netherlands, Portugal, Poland and Spain all started hiring more customs officials and developing software to handle the extra customs processes in 2019. France claims to have put the necessary infrastructure and systems in place at the border to allow trade to perform customs, veterinary and health checks on products coming in from the UK from 1 January 2021.

Officials from the Port of Calais and the Port of Rotterdam – two of the most affected European ports – recently told a House of Lords EU Goods sub-committee that they were confident they had the systems, infrastructure and people in place for the end of the transition period. Mark Dijk, from Rotterdam, said that they had recruited around 700 new customs officers and 100 new vets to perform health and animal checks. He added that 87% of terminals had been registered with their system, with the aim of 95% by 1 January. 750 temporary parking spaces had also been built for hauliers to process their paperwork. He warned however that producers and manufacturers may not be ready come 1 January, a sentiment echoed by Jean-Marc Puissesseau of Calais.

The information available on the government websites of Denmark, Austria and Slovakia is more limited. This may be explained by the uncertainty surrounding the outcome of UK-EU future relationship talks or that the coronavirus has diverted government and business bandwidth and attention from Brexit.

How ready are EU businesses for the end of the transition period?

As in the UK, the outbreak of coronavirus has diverted traders’ attention away from Brexit. UK businesses are not prepared for the end of transition, and in some cases Covid-19 means they are less prepared than they were a year ago. This is also likely to be true for EU businesses who will need to fill in new customs duties and be prepared for increased border controls and additional administrative burdens and regulations.

While the border infrastructure in France might be ready, recent reports show that businesses are far behind on their preparation. Currently, around 100,000 French companies trade with Britain. According to Isabelle Braun-Lemaire, permanent secretary of France’s Department for customs, a number of French businesses have not had the bandwidth or resources to focus on the changes that will ensue as a result of Brexit. She also complained about the lack of clarity from the UK Government on the new requirements that would apply to EU businesses exporting to the UK.

In September 2020, Enterprise Ireland and IHS Markit found that 42% of firms felt fully or significantly ready for Brexit, though 20% of companies are still confused about the preparation they need to get done to continue trading come January 2021. 75% of manufacturing firms identified customs and logistics as a major issue. When asked about what was preventing them from being ready, 75% cited uncertainty over negotiations and 56% cited their focus on Covid-19.

In October 2020, Deloitte Belgium found that nearly 80% of Belgian businesses thought that the UK would be leaving the transition period with no deal in place. Over 65% felt that there was 'room for improvement' in their readiness approach.

Meanwhile, in June 2020, Germany’s Business Group BDI and Deloitte Germany found that 74% of larger businesses (over €100,000 million in revenue) felt well or very well prepared for changes – though 34% were forced to postpone or scale back their Brexit initiatives to focus instead on covid-19 and 30% believed that a hard Brexit would lead to job cuts in their German business, a figure that rose to 50% in the banking sector.

Given the lack of concerted communications campaigns and the crippling impact Covid has had on businesses bandwidth and cashflow across the EU, it is difficult to predict with accuracy how prepared businesses are.

What difference would a UK-EU deal make to business preparations?

European businesses have begun to raise the alarm about the prospect of a no-deal outcome. On 14 October 2020, three major EU business groups – Germany’s BDI, Italy’s Confindustria, and France’s Medef – urged negotiators to swiftly conclude an agreement – adding that “a brutal split between continental Europe and the UK [..] would undermine tens of thousands of jobs and activities in all our countries”.

This is because, although EU businesses will face new customs and regulatory checks upon entering the UK, a deal could minimise some of the disruption. For example, a deal could streamline some new red tape. The UK and EU could decide to subject a smaller percentage of goods to border checks. Each side could also recognise the other’s trusted trader schemes for customs and conformity assessments for goods thereby minimising the need for checks or duplicate product testing.

It may also provide the political goodwill for limited unilateral measures which the UK and EU could adopt to help mitigate disruption in the first few months of 2021. These new measures would give traders time to adapt to the new rules – such as initially adopting light touch approach to enforcement of new rules or recognising the equivalence of the UK’s data protection legislation to allow data to continue to flow easily between the two parties. And it could pave the way for further discussions to provide greater market access or reduce red tape in the future.

What steps has the EU proposed to mitigate disruption in a no deal outcome?

In the event of no deal, the EU intends to introduce temporary measures to limit disruption in a few specific areas.

The plans include steps to preserve basic connectivity in aviation and road haulage for up to six months and to allow UK fishing vessels access to EU waters or up to 12 months (or until an agreement on fishing is reached with the UK), all of which will be conditional on the UK reciprocating.

The EU also plans measures to ensure rail operations through the channel tunnel are not disrupted and that aviation safety certificates issued to UK based companies will continue to be valid in the EU.

However, these mitigations would not come close to replicating the status quo or provisions that could be agreed in formal negotiations.

The EU has also said that it will not repeat some of the contingency measures it had planned to introduce ahead of a possible no deal last year– such as providing airlines with a grace period to comply with new ownership and control requirements.