EU Says U.K.’s Brexit Stance Will Add to Virus Damage for Firms

The U.K.’s refusal to extend the Brexit transition period will add to obstacles facing virus-hit companies, the European Union said as trade talks between the two drag on.

“Inevitable disruptions will occur as of 1 January 2021 and risk compounding the pressure that businesses are already under due to the Covid-19 outbreak” regardless of the outcome of talks, the European Commission said in a memo on Thursday. “Inevitably, the fact that the U.K. will no longer participate in Union policies as of the end of the transition period will create barriers to trade in goods and services.”

The EU published the document after talks between its chief negotiator Michel Barnier and the U.K.’s David Frost. In a tweet, Barnier said “significant divergences” between the two sides remain as they try to reach an agreement.

Outstanding issues to be resolved include the EU’s access to Britain’s fishing waters from 2021, the governance of the future relationship and whether the U.K. will have to follow EU rules in areas such as environmental and labor standards.

“Negotiations so far have shown little progress,” the European Commission said. “Discussions have now been intensified over the summer.”

Even if the U.K. and EU agree a deal which eliminates tariffs and quotas, there will be new barriers for business from 2021, the bloc said.

Lengthier border checks will be required, creating “administrative burdens” and “longer delivery times” within supply chains, the EU said. Businesses will also have to prove the U.K. origin of their goods in order to benefit from tariff-free trade, meaning extra paperwork.

The Commission called on businesses and citizens to take actions now to prepare, and not to underestimate the logistical challenges.

“Failing to take such preparatory measures will increase the negative impact and cost to their operations at the end of the transition period,” it said. “These changes are unavoidable.”

©2020 Bloomberg L.P.

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