Brexit jargon buster: Useful phrases for your business to understand

It’s no secret that Brexit is proving to be a lengthy procedure and it has generated significant Brexit jargon: words, terminology and slang used to describe the concepts encountered.

It’s also drawn a handful of former purely technical terms out of the woodwork and into everyday usage.

Below, we take a look at some of the most common Brexit jargon and try to explain in simple and neutral terms what they mean.

Because Brexit negotiations are still ongoing, we will periodically update this glossary with new Brexit jargon that comes into use.

Article 50

Part of the Lisbon Treaty, and therefore European Union (EU) law, used by a member state to initiate the process of withdrawing from the EU.

Two years are then allowed for this to occur, or potentially longer if the EU and member state agree this is necessary.

UK prime minister Theresa May invoked Article 50 in March 2017, following the European Union Membership referendum in 2016. This set the date for the UK leaving the EU as 29 March 2019.

Backstop

Contingency plans to ensure there remains a soft border (see below) between Ireland and Northern Ireland. The plan only comes into effect if definite agreement on the matter is not achieved before the end of the Brexit transition period in December 2020.

Despite the backstop being only a possibility in the event of an outcome neither side in the Brexit negotiations intends, it is reportedly a major political issue in negotiations.

Bregret

Regret about Brexit. This might be about the initial referendum result, or about the agreement (or lack thereof in the case of hard Brexit) and its impact on the country.

Brexit

The withdrawal of the UK from the EU, scheduled to occur at 11pm UK time on 29 March 2019. At that time the UK will likely implement the Brexit agreement, and the transition period will begin. It’s possible the Brexit date will change by mutual agreement between the UK and EU, and an allowance is made for this in the Article 50 legislation.

Brexiter

A supporter of Brexit. Also known as a Brexiteer. One side of the sometimes fractious Brexit debate, with Remainers (see below) on the other side.

Chequers agreement

A plan put forward by Theresa May in mid-2018 for a soft Brexit. It involves a “common rulebook” for trade and a “combined customs territory”, among other things. It was agreed by the UK Cabinet, with some dissenters, and formed the basis for negotiations with the EU that led to the draft withdrawal agreement (see below). Also known as the Chequers deal or the Chequers plan.

Common market

See single market.

Customs

The system for collecting duties on goods entering a country, typically involving official offices at every entry point into a country, such as ports like Dover in the UK, and Calais in France, which after Brexit will serve as an entry point from the UK into the EU customs union (see below).

Unless there is a free trade agreement or customs union between the UK and EU, all goods moving between the two areas will technically have customs duty applied, even if this is £0.

This is important as VAT on imported goods becomes payable at the same time that customs duties are applied. To avoid a cash-flow impact, the UK has proposed the re-introduction of postponed VAT accounting (see below).

A key component of the Brexit negotiations has been to create a customs union to ensure goods pass through customs without any friction (including customs duty being applied) or delay, which could affect food security among other things.

Customs partnership

A potential agreement between the EU and UK to create a soft border without immediate customs checks. A key component of a soft Brexit, and the customs backstop in Northern Ireland.

According to reports, the creation of a mutually agreed customs partnership has been a difficult issue to revolve.

Customs union

An agreement by two or more countries on how customs should be handled. The EU has a customs union that most of its member states participate in and that means goods can cross national borders without the immediate requirement for tariffs.

The UK is intending to create its own customs union with the EU, and this is a fundamental component of a soft Brexit.

Deal

The reaching of a mutually agreed Brexit withdrawal agreement between the UK and EU about how to handle customs borders and the free movement of people, among other things (see four freedoms, below).

Department for Exiting the European Union (DExEU)

The new UK government department created after Brexit to facilitate all aspects of the UK’s withdrawal from the EU, including Brexit negotiations but presumably also including ongoing negotiations during the transition period, and contingency measures such as ensuring food security in the event of a hard Brexit.

Divorce bill

An amount the UK will pay the EU after Brexit. The UK and EU have agreed this should be £39 billion, although the amount could still change. It represents the UK’s final payment to the EU to meet outstanding liabilities, as well as remaining yearly EU membership fees.

It is a mandatory component of any soft Brexit agreement and therefore a point of negotiation. In theory, it must be paid in the event of both hard and soft Brexit.

In the event of a hard Brexit, and the UK not paying the divorce bill (or not paying all of it), it’s been suggested that the matter would pass to international mediation.

European Economic Area (EEA)

The expansion of the EU’s common market to Iceland, Norway and Liechtenstein, all of which are not members of the EU but are members of the European Free Trade Association (see below).

This means the four freedoms apply to Iceland, Norway and Liechtenstein, just as they apply to the EU member states. As such, the free movement of goods, people, services and capital are allowed between the EU and EEA.

Notably, the members of the EEA are not actually in the EU customs union, and the fourth member of the EFTA—Switzerland—is not part of the EEA.

The UK has stated it does not want to be part of the EEA as part of its Brexit agreement, even though it is seeking a similar arrangement. See also European Free Trade Association.

European Free Trade Association (EFTA)

An organisation comprising non-EU members Iceland, Norway, Switzerland and Liechtenstein. EFTA member states access the European single market and are within the Schengen Area (see below) but are not part of the customs union.

EU referendum

Officially entitled The United Kingdom European Union Membership Referendum, held in 2016, in which the British people voted approximately 52% in favour of the UK withdrawing from the EU.

Some Remainer campaigners are requesting a second EU referendum is held (see second referendum).

European Commission

A branch of EU governance that manages its everyday businesses, such as enforcing legislation, including Article 50.

It has a taskforce that forms the Brexit negotiation team for the EU. This is headed by Michel Barnier, its chief negotiator, who represents the other 27 EU member states.

European Union (Withdrawal) Act

Known previously and informally as the Great Repeal Bill, this is the UK act of parliament that incorporates existing EU laws into UK legislation following Brexit, with adaptations only to take into account withdrawal from EU bodies, standards and so on.

As such it aims to ensure the easiest possible transition following Brexit, although it was also a necessity considering the alternative was to recreate much of the UK’s existing legislative corpus to remove references added through its membership of the EU.

Free trade agreement (FTA)

An agreement by two or more countries on how goods will be traded, typically to reduce tariffs. It results in the creation of a free trade area, which encompasses the countries within the agreement.

Four freedoms

The free movement of goods, capital, services and people that allows the European single market to function. When the UK leaves the EU, it also leaves the single market, although the UK government has stated it effectively wishes to maintain the four freedoms in some fashion.

In the event of a hard Brexit, all four freedoms will cease immediately between the UK and EU at 11pm on 29 March 2019.

Food security

Ensuring the food supply chain runs smoothly. In the context of Brexit, this refers to possible issues should a hard Brexit occur and the import of food becomes temporarily difficult or even halts because of increased administrative customs requirements or costs.

To this end, the government’s EU Energy and Environment Sub-Committee has looked into the matter and a Food Supplies Minister has been appointed to the UK cabinet to make contingency plans.

The UK imports 30% of its food from the EU. A recent government report said: “It is inconceivable that Brexit will have no impact on EU food imports to the UK.”

Frictionless border

See soft border.

Frontier workers

Union citizens or United Kingdom nationals who pursue an economic activity in accordance in one or more States in which they do not reside.

Hard border

National borders between the UK and the EU, such as those in Northern Ireland or Dover, in which goods and people cannot move freely because of customs requirements.

A hard border is an inevitable outcome of a hard Brexit and is considered very undesirable. A hard border could affect food security following Brexit, for example.

Hard Brexit

A situation where the UK leaves the EU with no agreement in place, in which case the four freedoms of the EU immediately cease with regard to the UK.

Both the EU and UK have stated they do not want a hard Brexit, although both have also released extensive documentation in readiness.

A hard Brexit is predicted to be initially chaotic for businesses that import or export not least because of the sudden increase in administration and customs costs at the UK borders following the end of the free movement of goods and people.

Several businesses, such as Premier Foods and pharmaceutical manufacturers, have stated they’re stockpiling goods in the UK to prepare for a possible hard Brexit. See also food security. Also known as a no-deal Brexit.

Host state

Either for Union citizens and their family members, the United Kingdom, if they exercised their right of residence there in accordance with Union law before the end of the transition period and continue to reside there thereafter.

Or for United Kingdom nationals and their family members, the Member State in which they exercised their right of residence in accordance with Union law before the end of the transition period and in which they continue to reside thereafter.

Indefinite leave to remain (ILR)

Also known as settled status. Proposals from the UK government that, following Brexit, will give any EU citizen already in the UK a right to live and work in the country following an application to do so, although it only applies if the individual has been in the UK for five years or more.

Those in the UK for less than five years will need to apply for pre-settled status instead (also known as temporary residence).

Joint Committee

A committee made up of representatives from both the UK and the remaining Member States that will oversee the implementation of the withdrawal agreement and subsequent trade agreement.

The Joint Committee, among its many powers, will have the right to make a single extension to the transition period beyond 31 December 2020, for example, to provide additional time to implement any of the transition arrangements.

Member State

These are legally defined within the Brexit withdrawal agreement to mean the Kingdom of Belgium, the Republic of Bulgaria, the Czech Republic, the Kingdom of Denmark, the Federal Republic of Germany, the Republic of Estonia, Ireland, the Hellenic Republic, the Kingdom of Spain, the French Republic, the Republic of Croatia, the Italian Republic and the Republic of Cyprus.

They also include the Republic of Latvia, the Republic of Lithuania, the Grand Duchy of Luxembourg, Hungary, the Republic of Malta, the Kingdom of the Netherlands, the Republic of Austria, the Republic of Poland, the Portuguese Republic, Romania, the Republic of Slovenia, the Slovak Republic, the Republic of Finland and the Kingdom of Sweden.

Most-favoured nation (MFN)

Rules laid down by the World Trade Organisation, of which the UK is a member, that oblige all members to apply the same trade agreement—in other words, to treat each nation it trades with as if it is most-favoured.

It prevents the UK giving the US a superior trade deal, for example, although negotiated agreements such as the EU’s single market can override MFN. In the event of a hard Brexit, MFN rules will apply to the UK.

No-deal Brexit

See hard Brexit.

Postponed VAT accounting

VAT is technically payable when goods enter the EU and customs duty is assessed. Goods that move between EU member states can be moved or sold without VAT (subject to certain rules).

To avoid creating a cash flow impact on importers after Brexit, postponed accounting has been proposed so businesses report the VAT impact in their VAT returns but only pay VAT if they have no output VAT (VAT on sales) to offset against.

Remainer

Somebody who disagrees with the UK leaving the EU. Sometimes the word is changed to “Remoaner”, a derogatory term intended to highlight ongoing complaints about Brexit and the desire for a second referendum.

Schengen Area

An area comprising most of the EU member states, plus several other European countries, in which passport and other border controls are largely abolished for citizens within the EU or those other European countries.

Additionally, the countries included in the Schengen Area have agreements that mean there are no requirements for citizens within the area to obtain visas.

Notably, Ireland and the UK are not part of the Schengen Area, although those countries within the European Economic Area are.

Second referendum

A suggestion by Remain campaigners that the UK holds a second referendum related to Brexit.

This could either once again ask whether the UK should leave the EU, or ask whether the UK population wishes to accept the Brexit agreement achieved by the UK government.

Potentially it could ask both questions. It would almost certainly require an extension of the two-year period set down by Article 50.

Settled status

See indefinite leave to remain.

Single market

The political structure at the heart of the EU that allows the four freedoms—the free movement of goods, people, capital, and services between the EU member states.

Upon Brexit, the UK leaves the single market so loses access to the four freedoms, although the UK government wants to retain access in some fashion as part of a soft Brexit agreement. Also known as the common market.

Soft border

National borders between the UK and the EU, such as those in Northern Ireland or Dover, in which goods and people can move freely because there are no immediate customs requirements or checks. Also known as a frictionless border.

A soft border for goods, at least, is a key component of a soft Brexit and the border between Northern Ireland and Ireland has been a particular sticking point (see backstop, above).

Soft Brexit

A Brexit in which there is an agreement in place between the UK and EU to enable in some fashion the free movement of goods, capital, services, and people across the UK/EU borders, whether that’s in Calais, Dover, Northern Ireland or elsewhere.

There are various levels of soft Brexit, depending on the degree to which the four freedoms are fully implemented, and the degree of “softness” has been a political issue.

Swimming pool Brexit

A term used to describe the potential difference between Northern Ireland and the rest of the UK when it comes to customs when trading with the EU following a soft Brexit.

Northern Ireland is at the deep end and could have different rules compared to the rest of the UK, at the shallow end.

Third country

A country that trades with the European Union but is not part of the EU or part of any free trade agreement with the EU. Trade should be based on most-favoured nation rules.

Trade union

Not to be confused with a workers’ organisation. Within the context of Brexit, the trade union refers to the desire to create some form of customs union between the UK and EU that enables at least free trade, if not all of the four freedoms at the heart of the single market.

Transition period

A period beginning on the Brexit date of 29 March 2019 and most likely ending on 31 December 2020—although there will, of course, be no transition period in the case of a hard Brexit.

During the transition period, some existing laws and treaties will still be observed in order to make the transition less abrupt for business, and give them time to adjust.

It’s also likely negotiations between the UK and EU to finalise the Brexit agreement will continue during the transition period. This could make for a fluid business environment.

Union citizen

They are legally defined within the Brexit withdrawal agreement to mean any person holding the nationality of a European Union Member State.

United Kingdom

This is legally defined within the Brexit withdrawal agreement to encompass the United Kingdom AND Gibraltar, the Channel Islands, the Isle of Man, and the Sovereign Base Areas of Akrotiri and Dhekelia in Cyprus.

It also includes the overseas countries and territories listed in Annex II to the TFEU (Treaty on the Functioning of the European Union) having special relations with the United Kingdom (i.e. Anguilla, Bermuda, British Antarctic Territory, British Indian Ocean Territory, British Virgin Islands, Cayman Islands, Falkland Islands, Montserrat, Pitcairn, Saint Helena, Ascension and Tristan da Cunha, South Georgia and the South Sandwich Islands, and Turks and Caicos Islands).

Withdrawal agreement

The withdrawal agreement is the Brexit agreement between the UK and EU. Although the UK government had previously created the Chequers agreement (see above), negotiators in the UK government and the EU have since agreed a 585-page draft agreement. This has yet to be ratified by either parliament.

World Trade Organisation (WTO)

A global trade body that includes the EU, US, China and most other countries with large or developed economies. The WTO regulates not only trade in goods among its members but also trade in services and intellectual property too, such as copyright.

In additional to their EU membership, all countries inside the EU have their own individual memberships of the WTO, and this includes the UK.

In the event of a hard Brexit, the UK will be obliged to switch to the WTO’s most-favoured nation (MFN) rules when trading with the EU.

This will mean the UK’s trade agreements with countries inside the EU will be the same as for most of those outside the EU, which will have a profound impact on trade and customs in particular.