What Happened
The United Kingdom will, in all likelihood, leave the European Union on Jan. 31. The Conservative Party won the country's Dec. 12 general election, securing 365 of the 650 seats in the House of Commons, clearing the way for Parliament to approve the Withdrawal Agreement that Prime Minister Boris Johnson reached with the bloc in October. The House of Commons will likely ratify the agreement by the end of this month, followed by the House of Lords in early January. On Brussels' side, the European Parliament is all but sure to ratify the deal sometime in January as well.
After leaving the European Union, the United Kingdom will remain in the EU single market until Dec. 31, 2020. During this so-called “implementation period," day-to-day life for households and companies operating in the country will generally remain unchanged. London and Brussels, meanwhile, will use this period to negotiate a free trade agreement. But because of their different strategic goals, it's unlikely that they will reach and ratify a trade deal before the end of next year, thus extending the Brexit-related uncertainty that has kept global markets on edge.
What It Means for Brexit
The fact that the United Kingdom will still preserve its access to the EU single market for the rest of 2020 means there will not be any significant disruptions in the free movement of goods, services, people and capital between the country and the bloc next year. It does not, however, mean the end of Brexit-related uncertainty.
By late 2020, Johnson wants to reach a comprehensive trade deal with the European Union that would go into effect starting in 2021. But this timeline may prove too ambitious for the two sides to find a consensus on the key components of a deal. Specifically, the European Union will insist that the United Kindom follow EU standards on areas such as the environment, workers' rights, taxation and regulations on state aid to companies. This demand, however, would go against the British government's pledge to make the British economy more competitive by moving away from EU rules. Brussels will also likely resist London's push to ensure that most, if not all, of its hypercompetitive financial services sector is covered in the trade deal. Other issues, such as preserving the bloc's access to British fishing waters, will also stand in the way of reaching an agreement.
The United Kingdom must decide by July 1 whether it wants to request an extension of the implementation period. Johnson has promised not to ask for such an extension, but complications connected to the negotiation of the free trade agreement may force him to change his mind. Should Brussels and London fail to reach a free trade agreement in 2020 (and should the British government fail to request an extension for the implementation period), it would force both sides to trade under costly World Trade Organization (WTO) tariffs starting in 2021. So while the Conservative Party's victory has virtually eliminated the chances of Johnson's “no-deal” Brexit in 2020, the risk of a hard Brexit in 2021 (in the sense of trade under WTO terms) will renew Brexit-related uncertainty in mid-2020.
What It Means for Scotland
The Conservative Party isn't the only one that came away with a big win on Dec. 12. The Scottish National Party (SNP) won 47 seats of the 59 total seats allotted to Scotland in the House of Commons — 11 more than the party earned in the 2017 general election. SNP leader Nicola Sturgeon said her party's strong performance has given her a renewed mandate to seek an independence referendum. However, the British government is unlikely to authorize a new referendum for the foreseeable future, especially so soon after the 2014 referendum in which Scottish voters chose to remain in the United Kingdom. So while the SNP's larger presence in London will likely continue to fuel tensions between the Scottish and British governments, the overall status quo is unlikely to significantly change in 2020.
