UK and EU negotiators announced today (19 March 2018) that they had agreed the terms of a Brexit “transition period”, effectively agreeing to defer the UK’s withdrawal from the Single Market and Customs Union until 1 January 2021.

For UK-based investment firms, this would mean continuing to be able to benefit from AIFMD, MiFID and UCITS passporting rights up until the end of 2020.

However, today’s announcement is not a legal agreement. It is an agreement in principle that is conditional upon the UK and EU agreeing the wider terms of the UK’s withdrawal from the EU, including the Irish border question. If no such agreement is reached, there will be no transition period and the UK will withdraw from the Single Market and Customs Union (and passporting rights will expire) on 29 March 2019.

For investment firms, today’s announcement is positive in that a transition period would allow more time to prepare for Brexit and extend the period during which passporting rights could be exercised; but unless and until a formal legal agreement is reached, firms should continue to work on their Brexit planning.