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Brexit Negotiations Continue as the U.K. Grapples with a Recession

As the U.K. deals with an economic recession due to the COVID-19 pandemic, negotiations continue with the European Union over trade as Brexit’s final deadline approaches.

What is the status of Brexit?

In January 2020, the United Kingdom officially exited from the European Union, signing a Withdrawal Agreement that entered the country into a transition phase. The U.K. is scheduled to definitively leave the EU at the end of 2020, with just over three months before the transition period ends. A trade deal must be reached prior to mid-October to make the end of the year deadline.

As it stands, negotiations are ongoing as the focus remains on mitigating any economic damages caused by Brexit. The EU is committed to ensuring that the U.K. will not undermine the standings of its own industries. Details that need to be worked out include the issue of fishing waters, whether the EU’s Court of Justice will arbitrate legal disputes, and ensuring a level playing field on regulations and standards. Such details and power maneuvers have led to a mostly stalled negotiation process.

Further complicating negotiations is Prime Minister Boris Johnson’s decision to undo sections of the Northern Ireland Protocol.

What is the Northern Ireland Protocol and its importance to Brexit?

Northern Ireland is officially part of the United Kingdom, while the Republic of Ireland is part of the European Union as established by the Good Friday Agreement of 1998. This agreement followed three decades of conflict known as the Troubles between Unionists of Northern Ireland who wished to be part of the U.K. and Irish nationalists who wished for Ireland to become independent of the U.K. The peace agreement established the coexistence of both Northern Ireland and the Republic of Ireland.

Following Brexit, Northern Ireland’s border with the Republic of Ireland would remain the only land border separating the U.K. from the EU, which led to the Northern Ireland Protocol. This Protocol, which would go into effect 1 January, 2021, sees Northern Ireland continuing to enforce the EU’s customs and products standards and rules, and eliminates the need to have a visible border between Northern Ireland and the Republic of Ireland used to check goods.

Prime Minister Boris Johnson made the controversial decision to introduce legislation that would undo the Northern Ireland Protocol. Johnson’s legislation would waive customs paperwork on trade crossing between Northern Ireland and the rest of the U.K. and unilaterally define which goods entering Northern Ireland would be eligible for tariffs should no trade deal come to fruition. These moves are meant to eliminate any barriers to trade between Northern Ireland and the U.K.

The government’s attorney general argued that parliamentary sovereignty gives Johnson the power to pass legislation that would breach treaty obligations. Detractors, including five living ex-Prime Ministers and senior leaders of Johnson’s Conservative Party argue that this move breaks international law, damages the U.K.’s reputation in international disputes, and risks the peace established between Northern Ireland and the Republic of Ireland. U.S. Speaker of the House Nancy Pelosi also warned of the bill’s chances impeding trade negotiations with the U.S. Conservative leaders in Parliament have signaled that they won’t support the legislation, but it remains unclear whether there is enough opposition to overcome Johnson’s majority in Parliament.

What is the status of the U.K.’s economy?

While negotiations over Brexit are ongoing, the U.K. is facing a harsh economic recession. Last month, it was reported that due to the COVID-19 pandemic, the U.K.’s recession was the worst out of the global economy. According to BBC, job redundancies, or layoffs, could reach as many as 735,000 this fall according to figures obtained by the Institute for Employment Studies (IES). The government released a Plan for Jobs in July, which will attempt to boost the U.K. economy as it experiences the economic fallout from COVID-19. The plan features a £160 billion support package, job retention bonuses, and infrastructure investment.

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How This Impacts Mobility

The growth of the U.K. economy and the status of the U.K.’s trade negotiations with the EU remain to be seen over the next few months. These situations will continue to negatively impact businesses in the U.K., while likely also trickling down to businesses relocating to the U.K. Worldwide ERC® will continue to provide any updates to this matter, and should any member have questions, please reach out to Vice President, Member Engagement and Public Policy Rebecca Peters, rpeters@worldwideerc.org.

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