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UK Reaches Last-Minute Brexit Deal With EU

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UK Reaches Last-Minute Brexit Deal With EU

Just days before a Dec. 31 deadline, the U.K. and the European Union have agreed to terms on a historic Brexit deal that establishes a framework for how European commerce will work starting in January.

What Happened: More than four years after the U.K. voted to leave the European Union, the EU and U.K. finally agreed to a plan for how that exit will take place. The Brexit deal is bullish for financial markets given that it appears Europe and the U.K. have avoided a worst-case “no deal” scenario.

Related Link: Airline, Cruise Stocks Sink As New COVID Strain Emerges In UK

Why It’s Important: The Brexit deal includes “zero tariff-zero quota” provisions that will ensure smooth cross-border trading will be preserved.

The deal would prevent cross-border traders from having to face a new set of tariffs and costs associated with a no-deal scenario.

Conservative U.K. Prime Minister Boris Johnson praised the deal at a press conference on Thursday.

“The arguments with our European partners were at times fierce but this, I believe, is a good deal for the whole of Europe,” Johnson said.

Britain became the first nation to ever leave the European Union on Jan. 31, 2020, 47 years after it first joined. The two sides have been engaged in intense negotiations on a trade deal since March.

The last reported point of contention was reportedly related to EU fishing vessels maintaining access to U.K. waters. The new deal includes a 5 1/2-year transition period in which all fishing vessels will maintain access.

While the Brexit deal may be bullish for investors in the short-term, deVere Group CEO Nigel Green said the official deal is far from the end of the negative Brexit fallout.

“Now there will need to be a period of major readjustment as the world’s sixth-largest economy diverges from the world’s largest trading bloc after being an integral part of it for almost half a century,” Green said Thursday.

“In addition, Britain now has to move quickly to secure new trading relationships — but these are always complex and lengthy to establish.”

Brexit will also open the door for other nations to potentially leave the EU and disrupt international trade, he said. 

What’s Next: The iShares MSCI United Kingdom ETF (NYSE: EWU) gained 0.2% on Thursday, while the iShares MSCI Eurozone ETF (NYSE: EZU) gained just 0.1%. The deal won’t actually be official until it is ratified by both the U.K. and EU parliaments in the days ahead.

 

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