Oliver Ralph

The UK is on the cusp of announcing a trade deal with the EU after months of talks, in a move that will govern the future relationship between the two.

The deal was due to be announced on Thursday morning, just ahead of Christmas Day. It marks the end of a gruelling negotiation process that has been under way since March.

Over the past week, UK prime minister Boris Johnson has been in talks with Ursula von der Leyen, president of the European Commission, in a last ditch effort to seal a deal before the deadline at the end of the year. The final big sticking point was EU access to UK fisheries.

The two sides are believed to have made progress on setting arrangements for how future negotiations on fishing rights will be linked to market access for goods — a crucial issue for unlocking a deal.

Sterling jumped against the dollar and the euro in anticipation of a deal.

Mehreen Khan

The EU and UK have agreed a landmark future trade agreement after negotiators were locked in hours of talks in Brussels.

In a statement, the British government said: “Everything that the British public was promised during the 2016 referendum and in the general election last year is delivered by this deal. We have taken back control of our money, borders, laws, trade and our fishing waters.

“The deal is fantastic news for families and businesses in every part of the UK. We have signed the first free trade agreement based on zero tariffs and zero quotas that has ever been achieved.”

European Commission president Ursula von der Leyen called the agreement a “fair and balanced deal”.

“It was a long and winding road but we have got a good deal to show for it. This agreement will set solid foundations for a new start with a long-term friend. It means that we can finally put Brexit behind us and Europe is continuing to move forward,” Ms von der Leyen said at a press conference on Christmas Eve.

Fishing access has been the final major sticking point between Brussels and London as the two sides hammered out the final lines of their historic deal that promises to define their relationship for generations to come.

The EU’s fishing rights in UK waters, worth €650m a year, have dominated the final stage of the talks.

British officials say the deal is expected to see Britain’s share of the catch in its own waters increase from around a half today to about two-thirds during the transition. Access to waters after the transition period expires — around the tenth anniversary of the June 2016 Brexit vote — will depend on regular negotiations.

Harry Dempsey

Boris Johnson’s government marked clinching a trade agreement with the bloc by saying that “we are no longer in the lunar pull of the EU”.

The deal, which was reached on Christmas Eve after months of negotiations, managed to achieve “all of our key red lines about returning sovereignty”, the UK government said in a statement.

One of the key red lines for Mr Johnson’s government was avoiding “automatic” trade sanctions if it fails to mirror future EU rules.

The statement added that it is the largest bilateral trade deal signed by either side, covering trade worth £668bn in 2019.

Oliver Ralph

A clutch of UK business groups has rushed to welcome the trade deal between the UK and the EU, agreed after months of negotiation.

Helen Dickinson, chief executive of the British Retail Consortium, said:

After years of campaigning for zero-tariff trade, we welcome the announcement of a free-trade agreement between the UK and EU.

This protects consumers on both sides of the Channel from billions in import tariffs on everyday goods. Given that four-fifths of UK food imports come from the EU, today’s announcement should afford households around the UK a collective sigh of relief.

The Association of British Insurers also welcomed the deal. Huw Evans, the director-general, said:

While this agreement doesn’t directly cover the insurance and wider financial services industry, it provides a good foundation for positive future cooperation with our European neighbours.

We hope that this will also allow for outstanding issues to be resolved quickly, such as an agreement on the UK’s continued participation in the motor Green Card Free Circulation Zone, which the EU Commission needs to ratify quickly.

Richard Burge of the London Chamber of Commerce and Industry, was more guarded. He said:

On the ground terms for business there are likely to still be questions unanswered and operational detail missing. The negotiations running this late in the day have not helped, so I hope both the Government and the EU will be open-minded regarding working together to cushion the impact of the change in relationship, wherever possible.

Adam Samson, Naomi Rovnick and Katie Martin

Sterling traded just below its 2020 peak against the US dollar after Brexit negotiators reached a historic UK-EU trade pact.

The pound was up 0.5 per cent to $1.3557 in New York dealings, leaving it close to the 2020 peak of $1.3624 struck earlier this month. Britain’s currency also advanced against the euro, gaining 0.4 per cent to €1.1121.

“Even though a deal will need to be voted on by MPs in Westminster and MEPs in Brussels a wave of relief has already washed over the London market,” said Susannah Streeter, senior investment analyst at Hargreaves Lansdown.

In equities, London’s benchmark FTSE 100 closed up 0.1 per cent prior to the announcement, with Lloyds Banking Group leading the pack with a gain of 4 per cent. The FTSE 250, which is more sensitive to the outlook for the economy because of its heavier weighting towards domestic-focused groups, rose 1.2 per cent. The mid-cap index has gained more than 18 per cent during the final three months of the year, leaving it on track for its best quarter since 2009.

European stock markets also inched higher on Thursday, with the regional Stoxx 600 benchmark gaining 0.2 per cent.

Investors now feel “an element of relief that one of the main uncertainties for 2021 is clearing”, said Cristina Matti, head of European small and mid-cap equities and country strategies at Amundi. “Investors feel more confident we can get back to our normal job of forecasting companies’ prospects in a more stable environment.” 

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Harry Dempsey

The Confederation of British Industry met the UK-EU trade deal with relief but urged Boris Johnson’s government to provide quick guidance to businesses with little over a week before the transition period ends.

“This will come as a huge relief to British business at a time when resilience is at an all-time low,” said Tony Danker, director-general of the CBI.

However, he cautioned that businesses would need support – as the deal had been struck with so little time before coming into effect – to ensure trade and services keep flowing between the island nation and the union. “Immediate guidance from government is required across all sectors,” he said.

He added that the government urgently needed to be clear on grace periods, during which violations of the rules are waived as businesses adapt to the new rules.

Mehreen Khan

EU Commission president Ursula von der Leyen told journalists at a press conference that the EU has put in place “strong measures” to ensure compliance with the terms of the trade deal and withdrawal agreement from the UK.

The commission chief said that the future trade agreement included a provision to review whether both sides are abiding by the terms of the level playing field “after four years”.

“We have built in safeguards that are necessary to make sure that there is a strong incentive for both sides to stick to what they have agreed to,” she said.

Talks had become deadlocked for weeks over how to manage potential regulatory divergence between the two sides and the design of dispute settlement mechanism.

Michel Barnier, EU chief negotiator, said the binding mechanism would allow either side to impose “unilateral sanctions which can be imposed quickly and effectively where necessary” over a breach of future standards.

Jasmine Cameron-Chileshe in London

UK prime minister Boris Johnson hailed the agreement with the EU as a “comprehensive Canada-style free trade deal” that would provide certainty for businesses.

The new deal will preserve tariff and quota free EU-UK trade for goods and is the biggest bilateral trade deal signed by either country, covering trade worth around £660bn.

“We have taken back control of our laws and our destiny”, he said at a Downing Street press briefing. “From January 1 we are outside the customs union and outside the single market. British laws will be made solely by the British parliament, interpreted by UK judges sitting in UK courts and the jurisdiction of the EU court of justice will come to an end.”

However, Mr Johnson stressed that the UK would continue to work in harmony with the EU, adding: “This is a good deal for the whole of Europe, and for our friends and partners as well.”

Speaking directly to European leaders, the prime minister added: “We will be your friend, your ally, your supporter and indeed never let it be forgotten – your number one market.”

“This country will remain culturally, emotionally historically strategically, geologically attached to Europe”.

Mr Johnson argued that the UK would have a stable and prosperous relationship with the EU under the new deal. “Winning freedom is a fantastic thing…. But it is how we use it, how we make the most of it, that is what is going to matter in the months and years to come”, he said.

The prime minister said that both sides had compromised throughout the process in order to move talks forward, and thanked negotiators for their efforts in recent months.

In a separate press briefing on Thursday afternoon, Ursula von der Leyen, the European Commission president described the deal as “fair” and “balanced” and said that the EU would continue to cooperate with the UK in areas of mutual interest, for example in the fields of climate change, energy, security and transport. “Together we still achieve more than we do apart,” she said.

With the UK’s transition period set to end on December 31, British MPs have been told to expect to hold an emergency session of the Commons on December 30.

Harry Dempsey

EU ambassadors will meet on the morning of Christmas Day to start reviewing the trade agreement with the UK, said the spokesperson of the bloc’s Committee of Permanent Representatives.

Sebastian Fischer said that Michel Barnier, the EU’s chief negotiator, would brief them on the negotiations, as ambassadors work through the holiday period to get the deal approved by the end of the year.

Any one of the 27 EU member states could veto the deal, meaning each country will be racing to understand an agreement that stretches to about 2,000 pages in a matter of days.

Jasmine Cameron-Chileshe

Nicola Sturgeon, Scotland’s first minister, criticised the new UK-EU deal and said that it strengthened the argument for an independent Scotland.

Writing on Twitter, Ms Sturgeon said that Britain’s departure from the EU was happening “against Scotland’s will”.

She wrote: “And there is no deal that will ever make up for what Brexit takes away from us. It’s time to chart our own future as an independent, European nation.”

The first minister also argued that while there was likely to be increased focus on the economic impacts of the new deal, other ramifications would also need to be considered such as the EU student exchange programme.

“Ending UK participation in Erasmus – an initiative that has expanded opportunities and horizons for so many young people – is cultural vandalism by the UK government,” she said.

Mamta Badkar in New York

Leaders from around the world cheered news of the trade deal struck on the eve of Christmas, more than four years after Britons voted in a landmark referendum to leave the EU.

Micheál Martin, Irish prime minister, said:

Brexit deal is very welcome after four long years of negotiations. Thanks to Ursula von der Leyen and Michel Barnier & team. While we will miss the UK from the European Union, the fact that a deal is now in place means we can focus on how we manage good relationship in the years ahead.

Giuseppe Conte, Italian prime minister, said:

Good news: deal between the EU and the UK has been agreed. Interests and rights of European businesses and citizens guaranteed. The UK will be a central partner and ally for the EU and Italy.

Christine Lagarde, president of the ECB, said:

I am pleased to see that an agreement on post-Brexit trading arrangements between the EU and UK has been reached and can now go to the [EU Council] for approval and [European parliament] for ratification.

Dutch prime minister Marke Rutte:

Excellent news that an agreement on a new EU-UK partnership has been reached after tough negotiations. This is of great importance to us all. We will now study it carefully. My compliments to Michel Barnier and Ursula von der Leyen on their tireless efforts.

Arthur Beesley in Dublin

Ireland has welcomed the EU-UK trade deal, saying it represented the “least bad version of Brexit” after a long and difficult journey since Britain voted in 2016 to leave the bloc.

Micheál Martin, Irish premier, said it was a “significant achievement” that there will be no tariffs or quotas but noted that companies trading with the UK still face new customs and regulatory formalities, procedures and checks.

“There is no such thing as a ‘good Brexit’ for Ireland. But we have worked hard to minimise the negative consequences,” the taoiseach said in a statement on Thursday.

“I believe the agreement reached today is the least bad version of Brexit possible, given current circumstances.”

The deal was “a good compromise and a balanced outcome” but he acknowledged Irish fishing communities will be disappointed with the agreement. Still, he said a no-deal Brexit would have completely excluded them from British waters.

Paying tribute to EU chief negotiator Michel Barnier, Mr Martin said the protocol to keep open the border with Northern Ireland was a good outcome for the region.

Mr Martin very much regretted while respecting Britain’s decision to leave the EU, but he insisted the UK will “always be a close friend and partner” of Ireland.

“The UK was an important member of the EU, and Ireland and the UK frequently worked closely together on many EU issues. However, as we now approach the end of the transition period, I wish the UK well in this new chapter in its history.”

Jasmine Cameron-Chileshe in London

The leader of Plaid Cymru said that the new deal is “far removed” from what was originally promised to the country but added that it marked a new chapter in Wales’ history.

In a series of Twitter posts on Thursday afternoon, Adam Price said that the Conservative Party had broken its promise to Wales.

“We were told we would not receive a penny less”, he said. “We were told our farmers would be able to sell their produce to the rest of Europe as before.”

However, he argued that the new deal ought to reignite the debate on Welsh independence, stating: “It’s time to build an #indyWales – with our own voice on the international stage, forging relationships with neighbours across Europe and beyond.”

Mamta Badkar in New York

German chancellor Angela Merkel hailed the Brexit deal as one “of historic significance” as she offered her thanks to EU’s chief negotiator Michel Barnier and European Commission head Ursula von der Leyen.

“With this agreement we create the foundation for a new chapter in our relationship. Even outside the European Union the UK will continue to be an important partner for Germany and the EU,” said Ms Merkel, who is stepping down next year after 16 years as chancellor.

Ms Merkel said the German government will thorougly examine the text of the agreement but expected it would move quickly since EU states were closely involved in the discussions.

“As the holder of the Presidency of the Council of the EU, we want to help ensure a swift and efficient ratification so that the agreement can enter into force in good time as of 1 January 2021,” said German economy minister, Peter Altmaier. “That will be challenging and require much flexibility on all sides. However, I am confident that this can be achieved.”

Mr Altmaier said that the agreement should give confidence to people and businesses in the midst of the coronavirus pandemic as it “creates stability and planning security and lays important foundations for future cooperation.”

Oliver Ralph

Investors have reacted to the UK’s trade deal with the EU, saying that it would help UK assets.

Oliver Blackbourn, portfolio manager at Janus Henderson Investors, said: “The UK has already suffered a deeper recession than many of its developed peers, and a drag on the recovery is likely to be unwelcome. However, a higher degree of clarity may encourage investors to look more favourably on UK assets.”

He added: “Sterling has moved to its highest level against the US dollar since early 2018 but remains weak against the neighbouring euro…Inflation expectations have moved lower with the rise in the pound in recent days, but real yields have risen as the potential shock to the economy in 2021 has reduced.”

David Page, head of macro research at Axa Investment Managers, said: “The announcement of the trade deal is unequivocal good news for both sides, although with UK trade to the EU far exceeding the reverse flows (42 per cent of exports, 50 per cent of imports in 2019), the UK is relatively the greater beneficiary. A reversion to WTO trade terms, which would have seen tariffs and non-tariff barriers rise across a broad range of categories…would have led to a much more material impact on the UK economy.

“Yet we should not underestimate the impact that a move from the EU Single Market to even a new deal will have on the economy. According to the latest Bank of England (BoE) Decision Makers Panel, only 70 per cent of UK business are ready, or “as ready as can be” for the new trading conditions,” he added.

Arthur Beesley in Dublin

Northern Ireland’s first minister Arlene Foster welcomed the EU-UK trade deal, saying that the region will seek maximum advantage from arrangements she opposed when Boris Johnson settled the Irish border protocol last year.

Mrs Foster, leader of the pro-Brexit Democratic Unionists, and deputy first minister Michelle O’Neill of the remain-supporting Sinn Féin Irish nationalists, set aside bitter divisions over the UK’s EU withdrawal as they hailed the deal on Thursday.

Their statements reflect relief in the devolved executive that a no-deal outcome was averted, something that would have disrupted the region’s economy and politics.

Mrs Foster had opposed the protocol to keep open the 310-mile land border with Irish republic because it keeps business in the region within the EU’s trade and customs regime, and she wanted Northern Ireland to leave the bloc on the same terms as the rest of the UK.

But on Thursday she indicated the executive will pursue all potential benefits from the protocol, which was cast as a “best of both worlds” opening for the region to trade freely with both the EU and the UK.

“This is the start of a new era in the relationship between the UK and the EU and in Northern Ireland we will want to maximise the opportunities the new arrangements provide for our local economy,” Mrs Foster said.

Ms O’Neill said the executive must consider detailed aspects of the agreement. “There will be many questions on what the agreement means for businesses and citizens and it is important they get that clarity,” she said.

“While we have distinctly different political positions on leaving the EU, we are all agreed that it’s in no-one interests to leave without a deal, therefore this announcement is good news which will be welcomed across the whole island.”

Adam Samson, Markets News Editor

The pound is up, but it’s not flying higher. Why not?

Sterling is trading at $1.3555 in New York dealing, leaving it shy of the 2020 high it hit earlier this month just above $1.36 as optimism over a Brexit trade pact was rising.

Kit Juckes, strategist at Société Générale, said the Christmas Eve deal resolved one of the major risks hanging over the currency. A no-deal outcome would have been “catastrophic” for the economy, he added.

“The worst case is avoided,” Mr Juckes said. “The next big move sterling will make is up, not down,” with the pound potentially advancing towards $1.40 in coming weeks, he added.

However it will take time for investors to weigh up the intricacies of the deal. The pound had already rallied sharply from its September lows below $1.27 as investors priced in increasing odds of an agreement and the dollar came under broad pressure.

Mr Juckes said the pound would still need a “catalyst” to build on its recent gains. The scale and speed of the economic recovery will also be a key factor, he said. This has taken on increased significance given the new social and business restrictions launched in recent days to slow the spread of coronavirus.

The deal announcement also came during a time of thin trading for European countries, with the Christmas break just hours away. In fact, the London equities market and major western European bourses were already closed when the deal was finally sealed.

Jasmine Cameron-Chileshe in London

Labour leader Sir Keir Starmer has described the new agreement as a “thin deal”, but indicated that the party will support it in any parliamentary vote, arguing that to do so would be in the national interest.

In a televised press briefing on Thursday, Sir Keir argued that the agreement was “not the deal the government promised” and failed to provide adequate protection for British manufacturing, financial services, creative industries and workplace rights.

The Labour leader also questioned the timing of the deal: “Leaving everything to the last minute has made it even more difficult for businesses to be ready.”

However, Sir Keir argued that at a moment of such “national significance” it would not be credible for his party to be on the sidelines or to abstain.

Sir Keir said that in the event of a Labour government in 2024, his party would inherit this new deal and would be expected to “make it work.”

“Leadership is about taking the tough decisions in the national interest. It is about being a serious, responsible opposition,” he added.

He also stressed that Labour would continue to hold the Conservatives to account, stating: “Let me be absolutely clear – and say directly to the government – up against no deal, we accept this deal, but the consequences of it are yours and yours alone….Responsibility for this deal lies squarely at the door of Number 10.”

Victor Mallet

French President Emmanuel Macron said European unity and firmness had paid off as he welcomed news of the Brexit deal.

“The deal with the UK is essential to protect our citizens, our fishermen, our producers,” he said on Twitter. “We will make sure that happens. Europe moves on and can look towards the future, united, sovereign and strong.”

Meanwhile, Joao Cravinho, Portuguese defence minister, lamented the break-up but said a deal was good for both sides. “It continues to be true that we all lose with Brexit, but this agreement allows us to limit the damage. The next stage should be an accord on defence and security.”

Ben Hall

The EU dealmaking machine has churned out another deal. Even in a year of momentous negotiations — on the pandemic recovery fund and rule of law safeguards — it is a remarkable achievement.

Four and a half years after the UK voted to leave the EU, London and Brussels have struck a free trade agreement that will frame their relationship for decades to come. It will maintain zero-tariff, zero-quota trade in goods in which the EU has a large surplus. It will help ease the inevitable frictions that come with the end of the transition period and provide the foundations for further talks on closer co-operation.

For the EU, this arduous task was always about limiting the damage from a UK withdrawal that has few upsides. From that perspective, it has been a resounding success both in terms of process and strategy. For a bloc that is so often hamstrung by divergent interests among its member states — and for British politicians who had banked on divide-and-conquer tactics — it has provided a lesson in the power of unity.

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