Four years and six months after the referendum that defined an era of British politics, the UK and the European Union agreed on Thursday a historic new trade deal to define their post-Brexit relationship.
Britain will complete its final exit from the 27-person bloc on January 1st. A no-deal Brexit could have caused a market shock that hurt some investors and affects both UK and European consumers and businesses.
“We finally found an agreement. It was a long and winding road, but we have a lot to show, ”said the President of the European Commission, Ursula von der Leyen.
British Prime Minister Boris Johnson said Britain will “be your friend, your ally, your supporter and never let you forget it, your number one market.”
He added that the deal, which came into force on Jan. 1, was the largest trade deal signed by either side, covering £ 668 billion worth of trade in 2019 and ensuring duty-free trade in most goods. Johnson said the deal will allow British companies “to do even more business with our European friends”.
A major sticking point in the negotiations was EU fishing rights in British waters, but Johnson said that for the first time since 1973 the UK will have “full control” of its waters.
The announcement on Thursday afternoon came later than expected, after what Ireland’s Foreign Minister Simon Coveney said was a “last minute problem” with the language of fishing rights.
Johnson and von der Leyen had been in close contact for the past three days in order to secure a ratification treaty in time for the end of the year.
Von der Leyen said: “Competition in our domestic market will and will be fair. The EU rules and standards are observed. We have effective tools to respond when fair competition is distorted and affects our trade. “
She added: “We will continue to work with the UK on all areas of mutual interest, such as climate change, energy, security and transport. Together we still achieve more than separately. ”
Johnson said that “beating COVID is our number one priority and I wanted to end any uncertainty and give the country the best possible chance to bounce back next year.”
Britain left the EU on January 31, but both sides had to reach an agreement on their future trade relations before the transition period ends at the end of this year. A post-Brexit deal drew a line under nine months of lengthy negotiations and multiple missed deadlines. The EU member states now have to ratify around 2,000 pages of legal text.
The EU’s chief negotiator for Brexit, Michel Barnier, said that “the clock is no longer ticking”.
Barnier added that the EU had shown unity and solidarity and that the agreement would now be presented to the European Council.
Markets have largely priced in a deal on future UK-EU trade, as both sides previously made concessions until the last minute.
More about markets:: The pound is falling slightly as the UK and EU reach the Brexit trade deal
Fishing rights were the final sticking point in what appeared to be a 2,000-page deal. While it was in the block, Britain had to share its waters with fishermen from countries like France and the Netherlands. EU fishing rights in UK waters currently amount to more than US $ 790 million a year.
“We have guaranteed our fishing communities full predictability for 5½ years and strong tools to create incentives to stay that way,” said von der Leyen.
Scottish First Minister Nicola Sturgeon said in a tweet: “This is a disastrous Brexit outcome for Scottish farmers … and like all other aspects of Brexit, it has forced Scotland against our will.”
Taoiseach Micheál Martin, Ireland’s Prime Minister, said the deal was very welcome after four long years of negotiations.
The analysts disagree on how a Brexit deal will affect the markets in the long term. The pound is expected to strengthen against the dollar, potentially pushing oil prices higher, and greater risk appetite among investors could even boost US stocks.
“Markets should respond positively to news that an agreement has been reached,” said Seema Shah, strategist at Principal Global Investors.
“Cleaning up this endless saga will bring relief to Brexit-weary investors and the public alike,” said Shah. “While Sterling is set to rebound, it cannot be denied that the deal we have agreed will not protect the UK economy from any form of economic disruption for the next year, which will only add to the deep economic scars already caused by COVID-19. “
continued to rally against the dollar in the hours leading up to the deal announcement, trading near 2½ year highs. Shortly after the deal was announced, the pound fell slightly to $ 1.3537 after hitting $ 1.36 earlier in the day.
The markets on both sides of the English Channel eagerly awaited the deal, which covers goods and issues around the borders, but not most of it the service sector, which is vital to the UK economy.
SYZ Private Banking’s chief economist Adrien Pichoud said the deal could ultimately boost cyclical stocks. “Combined with positive news about the introduction of Covid-19 vaccines, a Brexit deal will boost markets and strengthen the reflationary environment that we expect in the first half of 2021,” he said.
“We believe the conditions are ripe for a coordinated acceleration of global growth in the next three to six months, and this is just the beginning. The temporary return of growth and inflation increases the potential for cyclical names to outperform growth stocks over the period and we have added cyclicality to our portfolios through a global value ETF, ”added Pichoud.