Four years and six months on from the referendum that defined an era of British politics, the U.K. and European Union have agreed to a historic new trade deal on Thursday to define their relationship after Brexit.
The U.K. will complete its final exit from the 27-member bloc on Jan. 1. A no-deal Brexit could have caused a market shock, hurting some investors and impacting both U.K. and European consumers and companies.
British Prime Minister Boris Johnson said that the U.K. “will be your friend, your ally, your supporter, and indeed never let it be forgotten, your number one market.”
He added that the deal, which comes into force on January 1, was the biggest trade deal signed by either side, covering trade worth £668bn in 2019 and guaranteeing tariff-free trade on most goods. Johnson said the deal will allow U.K. companies “to do even more business with our European friends.”
A key sticking point of the negotiations had been EU fishing rights in U.K. waters, but Johnson said that Britain will have “full control” of its waters for the first time since 1973.
The announcement on Thursday afternoon came later than expected, after what Ireland’s foreign minister Simon Coveney said was a “last-minute hitch” relating to language over fishing rights.
Johnson and von der Leyen had been in close contact over the past three days in a bid to strike a deal in time for ratification before the end of the year deadline.Pound dips slightly as U.K. and EU reach Brexit trade deal Fishing rights were the last sticking point in a deal apparently 2,000 pages long. While it was in the bloc, Britain had to share its waters with fishermen from countries including France and the Netherlands. The EU’s fishing rights in U.K. waters are currently worth more than $790 million each year. “We have secured 5½ years of full predictability for our fishing communities, and strong tools to incentivize to remain so,” von der Leyen said. Scotland’s First Minister, Nicola Sturgeon, said in a tweet that “this is a disastrous Brexit outcome for Scottish farmers…and like all other aspects of Brexit, foisted on Scotland against our will.” Taoiseach Micheál Martin, Ireland’s prime minister, said the deal is very welcome after four long years of negotiations. Analysts are mixed on how a Brexit deal will affect markets in the long term. Expectations are that the pound will strengthen against the dollar, potentially lifting oil prices, and more appetite for risk among investors could even boost U.S. equities. “Markets should react positively to the news that a deal has been reached,” said Seema Shah, strategist at Principal Global Investors. “The cleaning up of this endless saga will provide relief to Brexit-weary investors and the public alike,” Shah said. “While Sterling will enjoy a bounce, there is no escaping that the deal agreed will not protect the UK economy from some form of economic disruption next year which will only add to the deep economic scarring already inflicted by COVID-19.” Plus: U.K. ETFs jump as Brexit deal is finalized Sterling GBPUSD,