What will happen tonight?

At 11:00pm, after more than 47 years of continuous membership, the UK will cease to be an EU member state.  From then onwards, the UK will no longer be represented in the EU’s political institutions, including the EU Council of Ministers and the EU Parliament.

But Brexit is not a single event; this only marks the next step in the “Brexit” process.

When Britain wakes up tomorrow, things won’t feel very different.  A transition period will have started, which is due to last until the end of 2020.

During this period, the UK will still be part of the EU Single Market and Customs Union, so trade in goods will be largely unaffected.  The UK must continue to obey EU rules and pay towards the EU budget, and EU citizens will still be able to travel to and work in the UK and vice-versa for British citizens.

What was the Crown Dependencies’ relationship with the EU until now?

The Crown Dependencies’ relationship with the EU is governed by Protocol 3 to the UK’s Act of Accession.  The Crown Dependencies are included in the EU customs territory and benefit from free trade in agricultural products and manufactured goods.  Importantly, however, the Crown Dependencies have always been outside the EU Single Market for the provision of services.

What will change tonight?

Not very much.  Despite the symbolism of the UK ceasing to be an EU member state, the transition period is intended to ensure that nothing actually changes overnight.

What will not change tonight?

Almost everything.  Crucially from the Crown Dependencies’ perspective, Protocol 3 will continue during the transition period, so you can expect business to continue as normal when you return to work on Monday.

The Crown Dependencies’ trading relationship with the EU will remain the same during the transition period while the two sides look to agree a free trade deal.

What will happen after 31 December 2020?

The UK will leave the Single Market and Customs Union at the end of the transition period, and Protocol 3 will fall away at the same time.

What, if anything, replaces it depends largely on what happens by 30 June, since the UK can’t ask the EU to extend the transition period after that date.  The EU is not expected to finalise its negotiating position until early March, which leaves less than four months to negotiate a free trade deal.

The EU Commission’s President has branded it “impossible” to secure a deal in this time frame, but UK law prohibits the Prime Minister from seeking an extension to the transition period.  This sets the scene for a rocky start to the summer in Westminster and Brussels, which is likely to result in financial market volatility.

It seems the most likely outcome is that the two sides will agree a “bare bones” deal by the end of 2020 covering tariffs and quotas on goods (but probably very little else).

The Crown Dependencies have never been part of the EU Single Market for the provision of services, so businesses in key local sectors, including e-business and financial and professional services, already operate as “third countries” in their dealings with EU member states.  As such, they will not be directly impacted by the end of the transition period, but they might experience secondary effects such as macroeconomic turbulence and labour shortages.

Final thoughts

For the time being, it’s business as usual in the Crown Dependencies.

Unless Boris Johnson makes a dramatic U-turn, the most noticeable change for Jersey, Guernsey and Isle of Man businesses at the end of 2020 will be Protocol 3 falling away.  This could deprive producers of agricultural products and manufactured goods of their ability to trade seamlessly with EU countries, but the impact will hopefully be cushioned by a new free trade deal.

Key Contacts

Garry Manley

Partner, Head of Corporate: Isle of Man

T +44 (0)1624 647 638
E Email Garry

James Gaudin

Managing Partner: Jersey

T +44 (0)1534 818 337
E Email James

Jeremy Berchem

Group Partner*: Guernsey

T +44 (0)1481 755 601
E Email Jeremy

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