EU lawmakers have warned that transitional arrangements may not be permitted under current EU laws, raising the prospect of a Brexit cliff-edge for both the UK and the remaining EU27.

Transitional arrangements are highly desirable to avoid a cliff-edge and allow time for both UK and EU businesses to adjust to the terms of the new UK-EU relationship.  When the UK leaves the EU, unless a trade deal (as well as the exit deal) has been finalised, the UK and EU will default to trading under the terms of the World Trade Organisation (WTO).  WTO terms represent very different conditions of trade to the current EU single market.

Therefore, without transitional arrangements, there is a greater risk that businesses will take pre-emptive action such as early relocation or stopping doing business in the UK.

The impact of Brexit will vary from one sector to the next, as will the nature of the transitional arrangements that are needed.

The UK government is consulting on what is needed by way of transitional arrangements, and Eversheds Sutherland has responded to that consultation. What the UK can actually achieve by way of transitional arrangements will depend on the negotiations with the EU.

A failure to agree transitional arrangements would impact not only UK businesses, but also EU businesses wishing to trade with or in the UK.

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