On 15 December 2017, the European Council found that ‘sufficient progress’ had been made in the Brexit negotiations such that talks could progress to second phase in the new year. On 20 December 2017 the European Commission published a first draft of the EU’s negotiating directives for the next phase. 

This new set of directives, concerning the proposed transition period, will be adopted by the Council of the EU at the end of January 2018. However, a second set of negotiating directives concerning the future EU-UK relationship are not expected to be adopted until March 2018. Only after this date can negotiations between the EU and UK on the final deal commence.

The EU’s position on the transitional deal states that:

  • The UK will continue to participate in the Customs Union and the Single Market (while applying all four internal market freedoms). The EU acquis should continue to apply in full to and in the UK as if it were a member state. Any changes made to the acquis during this time should automatically apply to the UK;
  • All existing EU regulatory, budgetary, supervisory, judiciary and enforcement instruments and structures will apply, and the jurisdiction of the Court of Justice of the European Union in the UK will be maintained;
  • The UK will be considered as a third country as of 30 March 2019. As a result, it will no longer be represented in the EU’s institutions, agencies, bodies and offices;
  • The transition period will be clearly defined and precisely limited in time. The Commission has recommended that it should not last beyond 31 December 2020.
  • In comparison with its previous stance, the EU has indicated that it would be possible to create a mechanism to include FTAs and other international conventions with third countries and other organisations.

Trade negotiations between the UK and the EU are expected to be carried out throughout 2018 and 2019 but it is unlikely that they will manage to conclude negotiations on a fully-fledged trade agreement by 29 March 2019. The transitional period could thus be used to continue negotiations for a EU-UK trade agreement.