Brexit was a bold move by the UK when the nation detached from European Union. The UK voted to leave the EU in 2016, and the process was a bit rough, but eventually, it passed through on 31 January 2020. While in the EU, UK was a major player in trading and economic activities, it was not easy to just up and go. Leaving the EU had to be a gradual process. Brussels and UK clashed over £40bn the Brexit divorce bill, which is expected to be paid in the post-Brexit arrangements. Both parties slowly adjusted to the new developments without causing any damage to other involved parties, and mostly not tainting any relations, especially those related to economies of various states. Due to this, it was agreed that both the EU and UK maintain things as they were while giving each other time to draft new acceptable and fair terms of a novel trade deal until 31 December 2020. After numerous compromises, negotiations and sacrifices, a new deal was finally agreed upon on 24 December [Source].
Various terms were established to enhance the UK-EU relations in the post-Brexit era, and they focused more on how they would live, work and trade together. Companies could still buy and sell their good across EU borders without paying taxes, and no amount limitation was placed on the traded goods. Those working and living in the UK-EU will have to strategize another way to do so, and UK nationals who wish to stay in the EU for more than 90 days in a 180-day period would now require a visa.
They agreed that Northern Ireland would continue to follow EU’s rules and border checks will only be conducted on goods from the rest of the UK. Since it was no longer part of the EU, the UK now had the liberty to place trade policies and negotiate trade deals with other countries. Efforts were made to establish trading relations with Australia, New Zealand, and others nations that do not have free trade deals with the EU.
Another major term agreed upon by UK and EU was the Brexit financial settlement, popularly referred to as “The Brexit Divorce Bill.” It is a sum of money that the UK was supposed to pay to the EU after withdrawing from the EU set-up. The money is meant to settle all financial obligations of the UK when it was still part of the EU. It also extends to engage in certain economic activities with the EU while gaining access to some markets in the trading sector. Initially, the sum of the money was pegged at £32.9 billion by the UK’s Office for Budget Responsibility on 31 January when the UK official left the EU. In the transition period of leaving the EU from 31 January to 31 December 2020, the UK continued contributing to the EU as a regular member, thereby reducing the financial statement [Source].
But on Thursday, the EU clashed with the UK after the EU announced that the Brexit bill owed by the UK is estimated at around €47.5bn (£40.8bn) in relation to the post-Brexit arrangements. Displeased by this figure, London, through UK Treasury, argued that the figure still ranges between £35bn to £39bn as previously established by both parties [Source].
According to Brussels, the first batch of payments to be delivered at the end of this year is £6.8 billion. The bill is supposed to pay for all the debts by the UK from the EU, liabilities incurred during UK’s 47 years EU membership, and the rundown include payments for infrastructure projects by previous UK governments, pensions, and sickness benefits for the EU officials, former EU commissioners, and MEPs. The payment of the Brexit bill for EU infrastructure and social projects, which previous UK governments agreed, form the largest part of the bill that is estimated to be around £36 billion.
EU 2020 consolidated accounts brought forward the “high” figure, but the auditors are yet to sign on it. Some financial and auditory officials have called the figure definitive. But the UK government contends that EU accounts just presented an estimated figure that does not consider the cash flow from some sectors. The government further explained that if all the loans given out by the EU are paid back, then the accounts will reveal a new bill figure [Source].
The UK’s Treasury was very determined in denying the published figure by the EU accounts in 2020, and believe that the figure proves to be too high considering the margin between their previous estimation with this new figure. However, others auditors doubt that the EU will change the figure, and if it does change, it will not fall by a large cut-off. The UK has the liberty to either pay the money quickly or spread it in installments over the following years. But it is still imperative for the UK to settle the bill to negotiate new trade deals vital for the economy and livelihood of businesses in the nation. That is why Prime Minister Boris Johnson agreed on the bill.
London now awaits to see the decision by Brussels as it laid done its disagreements of the suggested figure and see any changes after all relevant accounts auditing has been completed.