However, the fact that an agreement has been reached and the potential for future cooperation will reassure many.
“It’s a great relief after such a hot year and during such a disrupted festive trading season,” said Mike Cherry, chairman of the UK Federation of Small Businesses, but urged the government to fund companies that can spend money on training and advice after Brexit.
And the head of the Confederation of British Industries, which represents 190,000 companies, said companies needed even more time to think about the details and make changes. “It is imperative that both sides agree to smooth the cliffs next week,” said Tony Danker, the group’s general manager, who also expressed his relief that an agreement had been reached.
Some of the details released by the European Commission show that the new trade deal will apply immediately from January. It is applied provisionally for up to two months to allow the European Parliament time to examine and ratify the agreement.
The economists at the private bank Berenberg wrote in a note that an agreement could “limit part of the damage” if the internal market and the customs union were left. “By eliminating a major downside risk to the UK economy in the short and long term, a deal would unlock significant investment in the UK and aid the recovery once the ongoing coronavirus shock wears off,” they write. This would benefit stocks and the British pound over the next year, they added.
Without an agreement, both sides would have acted on World Trade Organization terms, the standard rules for trade between most countries. That would have led to high tariffs on agricultural products such as cheese and meat and made them more expensive. Brits who bought cars imported from Europe and vice versa would also have been faced with expensive tariffs.
The pound was the financial asset most sensitive to the Brexit negotiations, a rough barometer of the UK’s economic outlook. Before the vote in June 2016, a pound bought 1.30 euros. The day of the referendum was the worst in the history of the pound and has never fully recovered.
On Thursday, £ 1 bought € 1.11, up 1.4 percent in the 24 hours leading up to the deal’s announcement, but later slipped from its highest level.
“The markets have gone through the saber rattle of the past few weeks in anticipation of a deal. As a result, we have already seen a remarkable rise in sterling, ”said Karen Ward, strategist at JP Morgan Asset Management, in a statement.