HSBC - The UK-EU trade agreement: damage limitation

Key Points

• The economic aspects of the Trade and Co-operation Agreement (TCA) struck between the UK and the EU go further than the EU’s other recent free trade agreements.  The agreement has been ratified by the UK, and has been provisionally applied by the EU pending formal endorsement by the European Council and the European Parliament.

• There will be no tariffs on trade in goods, provided that rules of origin requirements are fulfilled.  But there is only limited provision for trade in services, with financial and digital services subject to forthcoming equivalence decisions from the EU.

•  Although measures have been put in place by the UK government to ensure that goods continue to move freely, the shift to these new trading arrangements will impose a significant cost burden on British businesses. This will dampen economic activity in the next few months, though the impact may be swamped by ongoing Covid restrictions.  Looking further ahead, the new barriers to the movement of goods, services, and people from the EU represent ongoing headwinds to economic growth.

Four and a half years after that momentous day in June 2016 when the people of the UK voted narrowly to  leave the European Union, the terms of that exit are finally known.   After the many dramas of recent weeks,  the Trade and Co-operation Agreement (TCA), which was struck between UK and EU negotiators on the  afternoon of Christmas Eve, was broadly in line with what had been expected once it became clear that the 
UK would be leaving the EU’s Single Market and Customs Union. 

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