The UK-EU Trade and Cooperation Agreement Three Years On: What Actually Works

The TCA in Headlines: What It Promised#

The Trade and Cooperation Agreement between the UK and EU entered into force on January 1 2021, covering goods trade worth around £660bn annually. The headline achievement was zero tariffs and zero quotas on goods trade between the UK and EU — a substantially better outcome than trading on World Trade Organisation (WTO) Most Favoured Nation terms, which would have imposed tariffs of up to 10% on cars, 12% on clothing, and higher on food products. But zero tariffs under the TCA are conditional, not automatic. They apply only to goods that meet the TCA's rules of origin requirements — and those requirements have proven significantly more complex than many businesses anticipated.

Rules of Origin: The Complexity Most Businesses Underestimated#

The TCA's rules of origin require goods to "originate" in the UK or EU to qualify for zero tariffs. Originating status is determined by product-specific rules that vary by HS code — some require a certain percentage of the final product's value to come from UK or EU sources; others require specific manufacturing processes to take place in the UK or EU. For manufactured goods with global supply chains, proving origin is administratively complex. UK exporters have found that products using significant amounts of non-UK/EU inputs — components from Asia, raw materials from outside the bloc — may not qualify for zero tariffs. UK importers of EU goods face the same mirror-image problem: their EU suppliers must prove that goods being exported to the UK meet UK origin rules.

Services: What the TCA Does Not Cover#

The TCA covers goods comprehensively but services only partially. The UK's services sector, which accounts for roughly 80% of GDP and a large portion of UK exports, has no equivalent of the goods zero-tariff deal. UK service providers no longer have automatic rights to provide services across the EU under the passporting regime that existed in the Single Market. Professional qualifications — lawyers, architects, accountants, engineers — are not automatically recognised across the EU. UK financial services firms lost the EU regulatory equivalence that allowed them to serve EU clients from London. UK digital services businesses face data transfer constraints under the GDPR framework. For a services-heavy economy, the TCA represents a significant reduction in market access that is not captured by the zero-tariff headline.

Financial Services: The Equivalence Gap#

Before Brexit, UK financial services firms operated across the EU under "passporting" — the right to sell services in any EU member state if licensed in the UK. Brexit ended passporting. The TCA contains minimal financial services provisions; instead, both sides agreed to a separate process for granting "equivalence" — regulatory recognition that allows market access in specific areas. The EU granted the UK equivalence in only a handful of niche areas (derivatives trading venues, for example) and has been slow to expand it. As a result, major banks and financial institutions relocated some operations to Dublin, Frankfurt, Amsterdam, and Paris to maintain EU market access. For UK businesses that rely on financial services — from trade finance to insurance — this has had practical consequences for product availability and cost.

Phytosanitary Checks: The Real Cost for Food Businesses#

The TCA did not resolve the UK's departure from the EU's Single Market for food and agricultural products, which includes the EU's sanitary and phytosanitary (SPS) framework. UK goods exported to the EU must meet EU SPS standards and pass border checks. EU food exported to the UK is subject to the UK's own SPS checks under the Border Target Operating Model. For food businesses — exporters and importers alike — this has added the cost of health certificates (€200-400 per consignment for veterinary sign-off), phytosanitary certificates for plants and plant products, and additional transit time through border control posts. Some perishable product flows that were commercially viable before 2021 are no longer viable when border check costs and delays are factored in.

What the TCA Review Might Change#

The TCA includes provisions for review and contains a joint UK-EU Partnership Council that meets regularly. The UK government has pursued a "reset" of the UK-EU relationship, with discussions about SPS alignment (which could reduce food border check costs), youth mobility arrangements, and regulatory cooperation. An SPS alignment agreement — sometimes called a "Swiss-style" veterinary agreement — would be significant for food and agricultural traders if achieved, potentially eliminating the health certificate costs that have most affected that sector. However, any such alignment involves accepting EU SPS rules dynamically, which has political implications. AskBiz tracks TCA developments and flags when regulatory changes affect the cost of trading with the EU.

• The UK-EU Trade and Cooperation Agreement has been in force since January 1 2021.
• Three years on, the picture is clearer: zero tariffs exist in theory but are conditional on complex rules of origin requirements that many SMEs struggle to meet.
• Services are largely excluded.