22 November 2019

Open Europe: What would a ‘No Deal’ after the transition period look like?

The Government’s Brexit deal leaves open the possibility of ‘No Deal’ after the transition period. Open Europe’s Dominic Walsh explains how this could come about, and points out that this would be a different type of ‘No Deal’ to one with no Withdrawal Agreement in place.

How ‘No Deal’ could happen after the transition period

The revised Withdrawal Agreement agreed by Boris Johnson’s Government replaced the UK-wide ‘backstop’ with a new Protocol that applies only to Northern Ireland. Unlike the previous deal, this Protocol does not provide a baseline for the wider UK-EU relationship in the event that a trade deal is not agreed by the end of the transition period. It is therefore possible that the new deal could lead to a form of ‘No Deal’ or WTO terms-Brexit scenario from December 2020 – as the Government’s own current Brexit guidance admits. Moreover, the Northern Ireland Protocol could also end if a majority in Stormont votes to end it – though the earliest this could happen by is 2026.

The Withdrawal Agreement allows for the UK and EU to agree, by July 2020, to extend the transition period once, for a period of up to two years. However, the Government has so far ruled this out. In theory, the time available for negotiating, ratifying and implementing a trade deal is therefore just 11 months – an unprecedented timetable in the context of other EU trade deals. If the transition is not extended in July 2020 and a deal is not in place by December, the default would be that the UK and EU move to trading with one another on WTO terms. This would also be the case after any extension to the transition period.

However, there may be other ways for the UK and the EU to buy more time and avoid this ‘No trade deal’ scenario – even if the July deadline for agreeing an extension is missed. If more time is needed for negotiations, the UK and EU could agree to a new bilateral “standstill” agreement replicating all or some of the transition period. Alternatively, if a deal has been negotiated but more time is needed for ratification, then those aspects of the deal which are considered an EU competence could be applied “provisionally.” And in any scenario, the transition period will probably need to be followed by a genuine “implementation period” to phase in an agreed deal – especially if the deal is based on a basic Free Trade Agreement (FTA), which would be a significant adjustment for businesses. In short, if there is political will on both sides to avoid ‘No trade deal’, then missing the deadline for transition extension need not be insurmountable.

Full analysis on Open Europe blog

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