At time of writing, the re-negotiated UK/EU withdrawal bill had not been officially ratified, but only the formalities of Royal Assent now need to be completed. Brexit will now finally happen on January 31 at 11pm British time.
The withdrawal agreement includes a transition period, which will last until at least the end of 2020. During this period, the existing trade relationship between the UK and the EU will remain unchanged. The Financial Conduct Authority (FCA) has clarified that the existing European financial passporting scheme will remain in force throughout the transition period, meaning that, for now, firms only need permission from their own national regulator, plus a ‘passport’, to trade across the European Economic Area.
The UK regulator also warns firms that EU law will still apply in the UK throughout the transition period, and any relevant new EU legislation passed this year will also come into force in the UK. All EU-derived consumer rights will also continue to apply in the UK.
The thoughts of the FCA and UK firms are now turning to the post-transition period. At present, there is something of a stand-off, in that UK Prime Minister Boris Johnson has ruled out an extension of the transition period beyond the end of this year, while EU officials say it will not be possible to negotiate anything but a very basic trade deal within that timeframe. It appears that any ‘bare bones’ deal would only cover the movement of goods and would not include any agreement regarding financial services and the other service industries that comprise 80% of the UK economy. FCA-regulated firms still face an uncertain time and a different sort of ‘no deal’ remains possible, i.e. one where no arrangement regarding financial services is agreed by the end of the transition period.
It is thought unlikely that the passporting regime will continue after the transition period, so many firms need to prepare for a scenario where they still need to carry on trading in Europe, or servicing contracts for EU-based customers.
There may be a need to prepare for Brexit if any of the following apply to a firm:
- The firm provides regulated products or services to customers resident in the European Economic Area (EEA)
- The firm has customers based in the EEA, including those who were previously UK resident but may now have moved abroad
- The firm markets regulated products or services within the EEA. This would include any firm whose website might in any way be targeted at EEA residents
- The firm has service providers who are based in the EEA
- The firm transfers personal data between the UK and the EEA or vice versa
- The firm is part of a wider corporate group that is based in the EEA
- The firm receives funding from an entity based in the EEA
- The firm outsource or delegates tasks to an EEA firm, or vice versa
- The firm is party to legal contracts which make reference to EU law
The FCA says:
“Over the next year, we will work with the Government to ensure that the UK financial services sector is prepared for the end of the implementation period. As things develop during this year, you will need to consider how the end of the implementation period may affect you and your customers, and what action you may need to take to be ready for 1 January 2021.”
The information shown in this article was correct at the time of publication. Articles are not routinely reviewed and as such are not updated. Please be aware the facts, circumstances or legal position may change after publication of the article