Brexit: Regulatory

The UK left the EU on 31 January 2020. A transition period, during which EU laws continue to apply in the UK, is due to end on 31 December 2020. The UK/EU Withdrawal Agreement sets out transitional arrangements and negotiations for the future UK/EU relationship are ongoing.

During the transition period, the regulatory requirements governing the supply of goods and services in the UK and the EU effectively remain unchanged. The same is true of the agencies and bodies responsible for monitoring and ensuring compliance. However, after the transition period, the UK will have its own regulatory regime.

The impact that this will have will vary by sector, with more heavily regulated industries likely to see the greatest upheaval. However, subject to the outcome of the negotiations, all businesses are likely to be impacted to some degree, with the "one stop shop" for regulatory approvals expected to cease for example.

One example of a wide-ranging impact is the product marking system, which indicates conformity with health, safety and environmental protection standards for certain products. Whilst the UK will introduce a new UK Conformity Assessed (UKCA) regime from 1 January 2021 for goods sold on the GB market (England, Wales and Scotland), the Government has recently announced that in relation to some goods placed on the GB market after that date, businesses can continue to use just the EU CE mark for a transitional period.  However, this will only be the case for as long as the EU and UK standards for the relevant goods don't diverge. The UKCA mark cannot be used alone for goods placed on the Northern Ireland market and, absent a deal, will not be recognised in the EU.  Accordingly, products exported to the EU will continue to need to comply with EU product standards and, where required, be marked with the CE mark. In addition, at the end of the transition period, the UK will be treated as a 'third country' under the EU regime and so UK based operators in a supply chain may see their classification as a 'manufacturer', 'importer' or 'distributor' change – and with it the regulatory obligations placed on them (and vice versa).

Packaging / labelling will also need to be updated at the end of the transition period, for example in relation to country of origin labelling. This will impact the vast majority of consumer goods businesses.

Almost all UK environmental legislation derives from the EU and this is another area where regulatory developments will need to be monitored. The Environment Bill 2019-21 already proposes a new independent environmental watchdog and amendments to the current regime governing air quality for example.

Heavily regulated sectors will need to prepare particularly carefully. For example:

Chemicals

The chemicals industry will be governed by a new UK REACH Regime and see the Health and Safety Executive (HSE) take over the functions of the ECHA (although the EU REACH Regulation would continue to apply in Northern Ireland in a no trade deal scenario). Under current plans (set out in the UK Government's guidance here), while existing EU REACH registrations and authorisations held by UK companies would be automatically transferred from the EU to UK system, UK companies would need to notify and submit registration data to the HSE within a period of transition. This could lead to the need for new commercial data sharing agreements, increased administrative costs and potentially further testing if data cannot be shared.

UK companies importing substances from the EEA would also need to notify the HSE using a Downstream User Import Notification (DUIN) of their intention to continue importing substances from the EEA and then follow up with a new registration.  Alternatively, UK downstream users could encourage their EEA supplier to appoint a UK-based Only Representative (OR), or change their source to a UK registered supplier.

In addition, at the end of the transition period, UK companies exporting chemicals to the EEA would still need to comply with the EU REACH regime. However, only companies based in the EEA may register directly with the ECHA. Without a valid REACH registration, the obligation for compliance with the EU REACH regime would therefore fall on the importer of the chemicals – and so potentially on UK chemical companies’ EEA-based customers.

Life Sciences

In the life sciences sector, absent reciprocal recognition measures, the EU would not recognise quality assurance (or QP release) by a UK business. Similar issues will impact upon the UK's involvement with the EU pharmacovigilance system, coordinated by the European Medicines Agency.

Aviation

Absent an agreement on mutual recognition, airlines' approvals, licences and certifications issued by the UK Civil Aviation Authority would no longer be recognised in the EU. Aircraft parts manufactured in the UK would also no longer be considered to meet EASA standards, potentially leading to the grounding of aircraft incorporating such parts.

The above are only a few examples of the regulatory issues businesses need to plan for ahead of the end of the transition period. In addition, industries that rely on international co-operation beyond pure regulation – such as the travel sector and its reliance on internationally negotiated travel rights – will need to follow negotiations with a particularly sharp focus.

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