What is the Brexit transitional period and what will happen if it is extended?

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The Brexit “transitional period” is dominating headlines yet again after Theresa May and the EU both said they were considering extending it, thus delaying the UK’s final departure from the bloc.

She indicated at a Brussels summit on Wednesday that she was not ruling out the UK remaining in the single market and customs union and subject to EU rules as late as the end of 2021.

British Prime Minister Theresa May, left, hugs Jean-Claude Juncker, President of the European Commission, as they meet in Brussels. (AP Photo/Francisco Seco)

British Prime Minister Theresa May, left, hugs Jean-Claude Juncker, President of the European Commission, as they meet in Brussels. (AP Photo/Francisco Seco)

Mrs May made clear she would accept an extension only as a means to ensure there was no hard border in Ireland if it proved impossible to implement the future partnership by the end of 2020.

The original plan for the transition was agreed back in March so you would be forgiven for having lost track of what it is and why it is important.

Here is a recap:

So what is this ‘transition period’?

The Irish border is a stumbling block in Brexit negotiations. Pic PA Wire

The Irish border is a stumbling block in Brexit negotiations. Pic PA Wire

The “transition” – initially expected to last around two years – will be a period during which businesses and the government can prepare and adjust to new arrangements after Brexit.

It will come into effect after the UK officially exits the European Union on 29 March 2019 and is intended to smooth the process of the UK leaving the bloc.

Theresa May, who generally refers to the period as the “implementation phase”, said it will minimise disruption to security matters, businesses and tourists.

Extending it could be a way to solve the issue of agreeing on a Northern Ireland backstop.

Makes sense, but how would this actually work?

In March, the UK and EU agreed on most of the fundamental aspects of the transitional period which, they announced, would last until 31 December 2020.

There are still details of the transition that have not been agreed on, but so far we know that during this period: EU citizens arriving in the UK and UK citizens arriving in the EU will enjoy the same freedom of movement rights.

The UK will still be part of existing EU trade deals but will able to negotiate future trade deals. The UK would remain in the customs union and single market so it would be subject to EU regulations – but will not have a say in changes to these rules. It will also effectively stay part of the Common Fisheries Policy.

-> Bernard Ingham tells Theresa May to show her nasty side in EU negotiations <-

One crucial thing that has not been agreed on is the issue of the border between Northern Ireland and the Republic – which will be the only land border between the UK and EU (recap what this is all about here and read what everyone’s stance on it is here).

The EU has suggested that a permanent insurance policy should be agreed on which would mean that Northern Ireland would stay in the single market and the customs union in the absence of other solutions to avoid a hard border. But the UK dismissed this idea arguing that it would break up the country and, instead, offered a more temporary solution.

Why is there now talk of the transitional period being extended?

The growing understanding on both sides is that by granting more time in the implementation period to agree a new UK-EU trade relationship would help avoid the problematic issue of the Irish border.

Both sides have struggled to come to agreement on the best way to agree on a backstop insurance policy which would prevent a hard border in the event that a final trade agreement between the EU and UK is not reached.

Extending the transitional period would mean that the UK has more time to agree a trade deal with the bloc, therefore reducing the likelihood that a backstop would need to be implemented in the first place.

-> UK economic growth forecasts down and Brexit is to blame <-

The EU is open to extending the period by up to one year but Mrs May has said she is considering just a “matter of months” extra. Increasing the transition by 12 months would delay the final departure almost three years after the official date of Brexit on March 29 2019, and more than five years after the 2016 referendum vote to Leave, potentially costing the UK as much as £10 billion in additional contributions to the EU budgets.

So how has this gone down?

As expected, Brexiteers hate the idea. Former Ukip leader Nigel Farage said any extension to the transition period could delay full withdrawal almost until the general election scheduled for May 2022, and “may mean we never leave at all”.

Tory MP Nadine Dorries repeated her call for former Brexit secretary David Davis to replace Mrs May as leader and Boris Johnson and Jacob Rees-Mogg joined Mr Davis and three other former ministers in signing an open letter warning the Prime Minister not to “bind the UK into the purgatory of perpetual membership of the EU’s customs union”.

Even the more moderate MPs are not happy, with Liberal Democrat Brexit spokesman Tom Brake saying the extension was merely “kicking the can further down the road and delaying, by a bit, driving off the cliff.”

Keep up to date with all the latest on Brexit here.