A new deal has been struck in principle on the terms of the UK’s exit from the EU following days of intense discussions between the European Commission and UK negotiators.
The reworking of the Withdrawal Agreement from November 2018 still needs approval of the UK and European parliaments. It includes a revised protocol on Ireland and Northern Ireland, and there is also a revised Political Declaration on the Framework for Future EU-UK Relations.
The European Commission’s chief negotiator, Michel Barnier, said solutions have been agreed that fully respect the integrity of the EU Single Market (that allows free movement of goods and services), and also avoid a hard border on the island of Ireland.
Also agreed was a new mechanism that would give members of the Northern Ireland Assembly a say on the long-term application of EU law, where relevant, in Northern Ireland.
“It is a solution that works for the EU, for the UK, and for people and businesses in Northern Ireland,” Barnier said in a statement released 17 October.
European Single Market and customs
To avoid a hard border between Ireland and the UK, a “limited” set of EU Single Market rules relating to goods; veterinary controls; agricultural production and marketing; VAT and excise in respect of goods; and state aid will apply to Northern Ireland.
Negotiators have also reached agreement on the way to avoid a customs border on the island of Ireland with Northern Ireland remaining part of the UK’s customs territory.
The agreed revised Political Declaration provides for a Free Trade Agreement (FTA) between the EU and the UK, the European Commission statement said.
While Prime Minister Boris Johnson described the agreement in a tweet as a “great new deal”, a range of UK political parties — Labour, Liberal Democrats, Brexit Party, and Northern Ireland’s Democratic Unionist Party — announced their opposition to the deal.
According to market reports, Sterling briefly increased to a five-month high against the dollar at nearly $1.30 before falling back to $1.28.
Jeremy Hawkins, senior European economist at markets data provider Econoday, said: “For financial markets, worst case is still a no-deal, and anything that reduces the probability of such an outcome is good news.”
He added that if the current proposals are passed, they would be viewed favourably and bolster the pound and “should also put at least a near-term floor under the [Bank of England’s] UK Bank Rate”, although exporters would be hit.
Hawkins said a rejected deal would mean a sharp sell-off in the pound. “With worries already building about softening global growth, it would hit investor sentiment hard, and the economic fallout in the UK and on the continent would be significant — the risk of recession in both would rise sharply,” he said.
— Oliver Rowe (Oliver.Rowe@aicpa-cima.com) is an FM magazine senior editor.
Video: Brexit rally fizzles as deal faces hurdles