After months of disputes, the new rules for trade were finally agreed just before the Brexit deadline!
The two sides reached a “zero tariff-zero quota deal” which will help smooth the trade of goods across the channel. It will bring relief to exporters on both sides that had been facing higher tariffs and costs had a deal not been reached.
"The deal is fantastic news for families and businesses in every part of the UK," a Downing Street source said of the news. "We have signed the first free trade agreement based on zero tariffs and zero quotas that have ever been achieved with the EU."
It is believed that both sides have committed to publishing a memo of understanding within twelve weeks that will provide further clarity on the equivalence rules. They are especially important for the financial industry as they enable U.K.-based companies to sell services into Europe, as long as the regulations don’t differ substantially from Brussels.
Confirming that the deal has been done at a Downing Street press conference, Mr Johnson said that country had taken back control "of our destiny", and promised that the deal would enable tariff-free trade with EU markets.
While he accepted that the UK had made some compromises on access to fishing waters, a controversial issue during the referendum and a sticking point of late-stage negotiations, he said that, as a result of the deal, the country will be able to "catch and eat quite prodigious quantities of extra fish."
He said: "This deal means new stability and a new certainty in what has sometimes been a fractious and difficult relationship."
"We will be your friend, your ally, your supporter, and indeed, never let it be forgotten, your number one market. Because although we have left the EU, this country will remain, culturally, emotionally, historically, strategically, geologically attached to Europe."
Major changes will now kick in on both sides of the English Channel where the full effects of Brexit will be felt. Rules that will cease to apply from January 2021 include those on freedom of movement (a conditional not absolute right of EU citizens to move to other EU countries to live and work).
The UK is ending free movement and will introduce an Immigration Bill from January 2021 to bring in a firm and fair points-based system that will attract the high-skilled workers we need to contribute to our economy, our communities and our public services. Boris intends to create a high wage, high-skill, high productivity economy and deliver a system that works in the interests of the whole of the UK and prioritises the skills a person has to offer, not where they come from.
Cardiff University’s Professor Patrick Minford, who championed Margaret Thatcher’s policies when she was under attack from other economists, said: “Brexit allows us to pursue free trade around the world, leaving EU protectionism behind us.
This will bring down consumer prices dramatically as our people will, at last, be allowed to shop around in the world market. Our producers too will have to match this competition, and this will raise our productivity and growth.”
The City of London, which is Britain's Financial Centre for international banks, asset managers, insurance firms and hedge funds, has been caught in the middle, leaving the future of the City’s relationship with the rest of Europe fractured and uncertain.
However, Michael Grote, a professor at the Frankfurt School of Finance and Management who has studied the effect of Brexit on financial service stated: “London will continue to remain by far the most dominant player.”
It is anticipated that Britain’s financial sector is still expected to be one of the largest in the world. The amount of money it manages is about 10 times the size of the British economy. The business that actually relates to clients in the European Union, and would be threatened by regulatory discord, is comparatively small.
“Not that much business in London and the United Kingdom’s financial centre actually depends on equivalence,” Alex Brazier, the Bank of England’s head of financial stability strategy and risk, told members of Parliament in September.
Therefore, long term, industry players are still positive on London’s fortunes as a global financial hub, with one hedge fund manager saying that he would still be willing to back the U.K. as “our business is largely immune to the changes and most aspects of the City are very reliant on talent, knowledge and relationships and for a lot of reasons this is embedded in the U.K.”
Natwests' Davies also echoes this view, saying London will remain the largest financial centre in Europe for the foreseeable future, but the extent that it can “retain intra-EU business will depend on the new arrangements on regulatory cooperation and equivalence.”
Former trade minister and Senior Advisor at Covington, Francis Maude, agreed. “London is not just a European financial centre but a global centre. I hope this will be dealt with in a pragmatic way with regulators operating in a non-political way”, concluding that, “this is not the end of a story, it’s the beginning of a different story.”