The UK and EU finally strike a Brexit trade deal

Negotiators reached a total agreement on a post-Brexit free trade deal after nearly a year of talks.

• The UK and the European Union have finally struck a Brexit trade deal.
• The agreement comes with less than a week to go until the UK is due to leave the EU's trade rules on 11 p.m. December 31 London time, or 12 a.m. January 1 Brussels time.
• They struck a last-minute deal on several thorny issues to avoid the worst-case scenario — a no-deal outcome.
• The two sides now face a race against time to put the free trade deal into law before the New Year.
• The trade deal will allow tariff-free trade to continue between the UK and the EU, but Brits can eventually expect widespread new barriers to trade and travel with the European continent.
• Visit Business Insider's homepage for more stories.

The UK and the European Union have struck a free-trade deal after nearly a year of talks, UK officials announced on Thursday.

With less than a week to go until the end of the Brexit transition period - which is 11 p.m. December 31 in London, or 12 a.m. January 1 in Brussels - UK and EU officials confirmed they had finally agreed on the terms a deal after weeks of intensive talks in London and Brussels. Under the terms of the agreement, there will be zero tariffs and zero quotas on goods.

Prime Minister Boris Johnson reportedly spoke on the phone with European Commission President Ursula von der Leyen multiple times this week to sign off the agreement after a final day of intensive talks about fishing quotas on Thursday.

"Everything that the British public was promised during the 2016 referendum and in the general election last year is delivered by this deal," said a UK official who was speaking anonymously.

Ursula von der Leyen, the European Commission president, said on Thursday: "It was worth fighting for this deal. We now have a fair & balanced agreement with the UK. It will protect our EU interests, ensure fair competition & provide predictability for our fishing communities. Europe is now moving on."

Analysis: The end of Brexit uncertainty is a victory for Johnson

The deal brings to an end four years of uncertainty and delay, which economists believe have already marginally suppressed the growth rate of the British economy. It could save the UK from an even worse fate had no deal been signed: KPMG forecast British GDP growth would be 4.4% in 2021 without a deal, but could be as much as 10.1% if their trading arrangements remained largely the same.

Britain got an ugly taste of "no deal" earlier this week when France closed its side of the border with the UK to prevent the spread of the aggressive new coronavirus variant, which appears to have originated in Kent. Up to 10,000 trucks were stuck alongside the roads of Dover for the last four days. France has since reopened its border and the enormous jam is slowly clearing.

It also hands Johnson a significant political victory: He came to power on a promise of "get Brexit done" and at last the dream has become reality. The Conservative party will likely revel in the achievement. But with Brexit off the table as a political and economic issue, the coming year will probably refocus Britain on Johnson's handling of the economy and the coronavirus crisis - two areas where he has underperformed. The UK was hit worse than most major economies during the pandemic lockdown.

Now, the details

The UK and the EU now face a race against time to put the deal into law before the New Year. The UK parliament is likely to be recalled next week for a vote on the deal, which is expected to pass comfortably given Johnson's 80-seat majority in the Commons.

The UK negotiating team, led by David Frost, and its EU counterparts, fronted by Michel Barnier, had spent months wrangling over a handful of thorny issues including fishing rights, rules to prevent unfair competition between the two markets (known as the "level playing field"), and how the UK-EU trading relationship would be governed after Brexit.

A no-deal outcome would have resulted in costly tariffs on a range of goods sold between the UK and the EU. That in turn would have led to price rises in UK shops and made it harder for businesses to export their products to Europe.

However, even with a free trade deal agreed, there is still set to be disruption in January due to an array of new checks at Britain's border with its biggest trading partner.

Britain is probably unprepared for the new terms of trade

Johnson's government has admitted that thousands of UK businesses, particularly smaller ones, have been too busy dealing with the impact of the coronavirus pandemic to make necessary preparations for Brexit.

UK officials are bracing themselves for more long queues of lorries heading for Dover and ports elsewhere in the country early next year.

The negotiations nearly collapsed at the end of the summer when Johnson tabled legislation designed to unpick parts of Brexit Withdrawal Agreement covering Northern Ireland. His government has admitted that going ahead with the plan would break international law, prompting fury in Brussels and attracting criticism at home.

Johnson's government agreed to remove the controversial clauses after UK and EU officials reached an agreement on how to implement the post-Brexit protocol for Northern Ireland. 

What will the trade deal mean for the UK?

Details of the deal are still emerging and the final text is expected to be over 1,000 pages in length.

However, this is what we know about the key elements of the deal.

Tariff-free trade will continue

A tarriff-free deal will come as a welcome relief to many UK and EU businesses.

In a no-deal outcome, businesses in Britain and Europe would have been required to pay an additional tax on a wide range of goods imported from each one another.

This would make doing trade more expensive and led to companies raising the prices of everyday items like food and drink to make up for the extra cost.

But there will many new border checks

However, there will be a host of new checks on goods crossing the border due to the UK's decision to leave the EU's Single Market and Customs Union.

Starting January 1, British businesses that export to Europe will have to submit customs declarations and other paperwork in order to get their goods across the border. UK officials estimate that there will be over 400 million additional customs checks a year on goods going to and from the EU.

There'll also be costly processes for exporters of food, plant, and animal goods to the EU, due to the bloc's strict health & safety rules.

This mountain of new red tape is why Johnson's government is bracing itself for delays at the border early next year.

Michael Gove, the Chancellor of the Duchy of Lancaster, said last month that "inevitably" there would be a "rise" in traffic on Britain's motorway in January, as businesses adapt to these major new rules and regulations.

The UK government has said there could be queues of up to 7,000 HGVs in a reasonable, worst-case scenario.

It is for these reasons that departing the EU with a trade deal is still set to leave the UK significantly worse off. The country's long-term, economic output will be reduced by four percentage points, according to the Office for Budget Responsibility's most recent forecast.

Britain will gain more control of its fishing waters

British fishermen are expected to gain a bigger share of fish caught in British waters as a result of the trade deal.

The exact details of the new arrangement are yet to be confirmed, but UK and EU negotiators have spent weeks tussling over what percentage of the value of fish caught by EU fisherman in British waters should be returned to Britain.

Multiple reports this week said that the two sides were moving towards a compromise of EU boats being allowed to keep around two-thirds. They have also been trying to agree on the length of a transition period during which the new arrangement will gradually come into effect. 

Any agreement on fishing will have had to garner the approval of French President Emmanuel Macron, who has warned throughout the Brexit process that he would not sacrifice the rights of France's fishing industry in a deal with the UK.

Negotiators were also trying to reach a compromise over the length of an adjustment period during which the new rules for the fishing industry would gradually come into effect.

While fishing was seemingly been a make-or-break issue in these negotiations, the industry's contribution to the UK economy is pretty negligible at less than 1%. However, it has been a totemic issue in the Brexit debate ever since the 2016 referendum campaign, largely due its connotations with sovereignty and control.

Travelling to the EU from the UK will become harder

The UK's decision to leave the European Single Market doesn't just impact the movement of goods but that of people, too. This will still be the case despite Britain and the EU striking a free trade agreement.

People making trips to the EU lasting 90 days or more will need to secure a visa, and Brits heading for the continent for any length of time will be required to have their passports stamped when they leave and re-enter the UK. 

Those driving to the EU from next year will need to obtain a "green card" and a GB sticker, and in some EU countries will need an International Driving Permit.

Travellers will also need to take out new health insurance to replace the European Health Insurance Card, as the latter will no longer be valid for most Brits from next year.

Changes will affect pets, too. Those planning to take dog, cats, and ferrets with them to the EU will need to get their pets vaccinated at least three weeks before travelling.

They'll also need to secure Animal Health Certificates at least ten days before departure, as the EU's pet passports will no longer apply to British travellers.