After the UK and the EU agreed on a new trade deal – five years after Brexit – wealth managers react.

After six months of talks, UK Prime Minister Sir Keir Starmer and EU Commission President Ursula von der Leyen have agreed on a new UK-EU trade deal, adding to recent pacts the UK has signed with countries such as India and the US.

While drawing broad approval from parts of the commentariat, and financial markets, the agreement with the EU also prompted anger from opposition politicians that Starmer has given too much ground to the 27-country bloc.

Chris Hiorns at EdenTree Investment Management, broadly welcomed the deal. 

“Although as always the devil is in the detail, the deal appears to be a positive for both the UK and Europe,” Hiorns, manager of the EdenTree European Equity Fund, said in a note. “It is worth remembering that while some – US President Donald Trump included – seem to believe that trade deals are very much a case of ‘the winner takes it all,’ the reality is a good trade deal is beneficial to both parties. The improving relations between the UK and Europe should help improve sentiment towards European companies and equity markets compared to the US.”

Pimco, the large US debt fund management house, said the deal would provide some benefits, but took a cautious line.

“The deal announced today is unlikely to significantly alter the long-term growth outlook for the UK, or indeed the EU, as the primary source of post-Brexit economic challenges remains unchanged," Peder Beck-Friis, economist at the US-headquartered firm said. "While there are generally no tariffs on UK goods entering the EU, non-tariff barriers, such as additional paperwork to comply with EU regulations, continue to impact trade."

"UK goods exports have declined by approximately 20 per cent since Brexit, whereas exports from most other countries around the world have increased following the pandemic. A more substantial improvement in trade flows between the UK and EU would likely depend on greater regulatory alignment and mutual recognition of standards. Nonetheless, the deal provides incremental progress, particularly by reducing frictions in food exports, which could help support trade activity and economic cooperation over time," Beck-Friis said.

Starmer hailed the deal as a “landmark deal” whilst von der Leyen said it was an historic moment. “It gives us unprecedented access to the EU market, the best of any country outside the EU or Efta, all the while sticking to the red lines in our manifesto about not rejoining the single market, the customs union and no return to freedom of movement,” Starmer said.

However, Conservative leader Kemi Badenoch said the UK “was becoming a rule-taker from Brussels once again,” and accused Starmer of selling off the UK fisheries sector.  

The fisheries deal between the EU and UK signed in 2020 will continue for 12 years. There will be no increase in fish quotas. EU fishing vessels can fish in UK waters, but they require a valid licence, and there are annual negotiations on access and share of stock. The UK government has announced a £360 million ($481 million) investment into the fishing industry for new technology and equipment to modernise the fleet and train the workforce.

British passport holders can also use more eGates in Europe to avoid long border control queues that have become the norm. Pet passports will be bought back so dogs and cats from the UK will no longer need animal health certificates for every trip. A new sanitary and phytosanitary (SPS) deal has been agreed to cut red tape needed to import and export food and drink between the UK and EU.

On defence, a new security and defence partnership has been agreed so the UK defence industry can participate in the EU’s plan for £150 billion defence fund called Security Action for Europe (SAFE).

The deal will also see closer cooperation on emissions by the UK and EU, linking their emissions trading systems.

British steel exports will be protected from new EU rules and tariffs to save UK steel £25 million a year.

The two sides have also agreed to work towards an Erasmus programme, the student exchange system which was removed when Brexit took place. They have also agreed to talk about the UK having access to EU facial image data to help catch criminals. They have also agreed to help tackle illegal migration, which remains a hot political issue in the UK.