As an “unprecedented” 2020 whistles by us at an alarmingly fast pace, it appears increasingly likely that a "hard Brexit" will occur at the end of the year, paving the way for an unprecedented trading situation 2021.

Technically, Brexit has already occurred and the UK left the EU on 31 March 2020, but is currently in a transition period set to last until 31 December 2020. During this period, the UK remains a member of the Single Market and very little changes from a trade in goods perspective during this time. 

While the world is focused on unprecedented COVID-19 matters, the UK and EU will/are conducting negotiations to determine what their relationship will be, following the end of the transition period, at 11pm 31 December 2020. A one-off extension to the transition period is possible, but such an extension can be for no more than two years. It would need to be agreed by a decision of the UK-EU Joint Committee before 1 July 2020. The UK and EU would need to agree both the length of an extension and other terms (such as the UK’s financial contribution to the EU budget for the extended period). 

However, UK Parliament has enshrined in law that the transition period cannot be extended. The law prohibits UK Ministers from agreeing to an extension of the transition period which means that, if the Government wanted to agree to an extension, it would first need to make sure that the restriction is repealed in domestic law. This would mean first having to pass a further Act of Parliament. 

Government officials and ministers have repeatedly stated that they will not ask for an extension to the transition period, even during the current COVID-19 crisis. Assuming no extension is sought/allowed, then at the end of the transition period, the trade rules that the UK are subject to will depend on the status of a potential trade deal between the EU and UK. 

If a trade deal is reached, then at the end of the transition period, the UK will cease to be subject to current rules and will instead have to trade with the EU under the rules of the trade deal.

However if no trade deal is reached (as is looking increasingly likely), then in 2021 the UK will be subject to trading with the EU on WTO rules and all the new complexities that brings - meaning one “unprecedented” year could very well lead to another...