The pound jumped more than 1.3% in the hours leading to Thursday’s announcement of a Brexit deal, a jolt of confidence in the British economy as London and the European Union completed an agreement that will define their future trading relationship after years of negotiations since the country voted in 2016 to leave the bloc.
The agreement, announced Thursday afternoon, still requires approval by the British Parliament and European leaders, but it removes a major potential economic liability of Brexit: the imposition of tariffs between Britain and its largest trading partner starting Jan 1.
Still, even without tariffs, British authorities expect the frictions of cross-border transactions, which will now require customs checks and new documentation, to weigh on an economy already labouring under severe lockdowns to curb the coronavirus pandemic.
“We have completed the biggest trade deal yet,” Prime Minister Boris Johnson said at a news conference in London as he sold the benefits of the deal he said was worth 660 billion pounds, or $900 billion, a year.
The European Commission president, Ursula von der Leyen, described the deal as fair to both sides. “We have finally found an agreement. It was a long and winding road, but we have got a good deal to show for it,” she said in Brussels.
European stock markets, which ended their trading sessions early for the Christmas Eve holiday, all closed higher, reflecting relief among investors that a no-deal Brexit had been avoided. The FTSE 250, which includes mid-sized British-based companies, ended 1.2% higher. On the continent, Germany’s DAX rose 1.3%. On Wall Street, the S&P 500 was 0.2% higher.
The talks had been prolonged right into the eleventh hour over three issues: business competition rules, fishing rights and how any disputes under the deal would be resolved. The final issue to be settled was European access to British waters for fishing.
The head of Confederation of British Industry, which represents 190,000 businesses across the country, called the deal a “huge relief” but said companies still needed more time to pour over the details and implement changes.
But some of the details published by the European Commission show the new trade agreement will apply immediately starting Jan. 1. It will be provisionally applied for up to two months to allow time for the European Parliament to scrutinize and ratify the deal.