The UK and EU have made significant progress on two of the most contentious issues: a level playing field in trade and governance. Fishing rights, however, are still the subject of intense negotiations.
From 1 January, goods entering the EU from the UK will have to undergo a number of new practices and controls, including customs declarations, rules on control of origin and food inspections.
For goods entering the UK from the EU, the UK government has decided to delay by six months the imposition of comprehensive controls. For financial services, there will no longer be equivalence.
Financial companies based in the UK and the European Economic Area will no longer benefit from passport rights. However, as the EU relies significantly on UK CCPs for derivative contracts, to avoid abrupt disruptions the European Commission has adopted an eighteen-month equivalence for UK CCPs.
For the time being, Prime Minister Boris Johnson, has ruled out an extension of the transition period to 2021. However, it is worth noting that since the Brexit referendum, none of the deadlines have been legally binding.
With real progress in recent weeks, and given that a no-deal would clearly not benefit anyone, both sides could once again agree to extend the negotiations.
One option would be for the European Parliament to approve an agreement in principle by 31 December and complete formal ratification in early 2021. In this case, short-term measures could be put in place to minimise any trade disruption before the new rules come into force.