Britain has reached a historic deal on its EU exit terms, enshrining special rights for 4m citizens and paying €40bn to €60bn in a hard-fought Brexit divorce settlement that clears the way for trade talks next year.
Theresa May, the UK prime minister, and Jean-Claude Juncker, the European Commission president, met in Brussels early on Friday to sign off a 15-page “progress report” that will allow EU negotiators to recommend opening a second phase of talks on post-Brexit relations.
After a meeting over breakfast, Mr Juncker acknowledged at a press conference alongside Mrs May that the agreement had come only after a “difficult negotiation”, but said both sides had shown a “willingness to compromise”.
The breakthrough came after a week of high drama in Brussels and Westminster over Northern Ireland’s border, with original compromises scuttled on Monday by the Democratic Unionist party, Mrs May’s parliamentary allies.
Arlene Foster, DUP leader, made it clear that she had reservations about the final wording of the deal, but she told Sky News she had secured “substantial changes” to the text.
“There is no red line down the Irish Sea and clear confirmation that the entirety of the UK is leaving the EU, leaving the single market and leaving the customs union,” she said.
However, the agreement appears to commit the UK to keeping Northern Ireland’s regulatory regime in “full alignment” with EU law. It says that “in the absence of agreed solutions” on a post-Brexit trade regime, London was committed to an “all-island economy” — including having Northern Ireland abide by the rules of the EU single market and customs union.
Sterling saw choppy trading following the pact. It was up 0.2 per cent on the day at $1.3502 against the dollar in morning trading, and was 0.3 per cent stronger against the single currency at €1.1482, a six-month high.
Mrs May said that the agreement would honour Britain’s financial obligations to the EU and guarantee the right of EU citizens to “go on living their lives as before”.
The prime minister’s decision to seal the agreement on Friday marked the culmination of a three-week diplomatic effort to finalise the most contentious divorce terms. EU leaders will formally decide at a summit next week whether it represents “sufficient progress” to start the second phase of negotiations.
“We all know breaking up is hard, but breaking up and building a new relationship is harder,” said Donald Tusk, European Council president. “The most difficult challenge is still ahead.”
Michel Barnier, the EU’s chief Brexit negotiator, said that the UK now faced the prospect of a Canada-style trade deal with the bloc — an accord that is primarily focused on goods rather than services and falls far short of Britain’s current full access to the single market.
“That will be the model we will have to work on,” he said.
After meeting with Mrs May, Mr Tusk noted there was now in practice “less than a year” to negotiate an outline for such a trading relationship. He added that talks should start “immediately” on a two-year transition period, during which “the UK will respect the whole of EU law including new law”.
Business leaders cautioned that, despite Friday’s breakthrough, uncertainty would remain until a formal transition arrangement was signed off.
“I don’t think that it changes anything,” a senior executive at a large US bank told the Financial Times. “The ‘easy’ part has taken a year to agree. We now have less than a year to negotiate the hard part . . . Nothing really changes until a transition period is hard baked into the agreement.”
Mrs May said this week’s talks had been needed to “strengthen” the language in the deal on Northern Ireland, which she said would preserve “the constitutional and economic integrity” of the UK while preventing a hard Irish border.
She said the deal meant both sides “will work to achieve the trading relationship between the UK and the European Union that we want to see”.
The text says if Britain and the EU fail to settle the terms of their future relationship, the UK will maintain “full alignment” with EU internal market and customs rules, which underpin trade across the Irish border.
In such a scenario, the UK will also “ensure that no new regulatory barriers develop between Northern Ireland and the rest of the United Kingdom”, unless such measures are decided on by the Northern Irish authorities.
Dublin welcomed the deal, saying all its goals had been met.
Mr Juncker underlined that, while the deal was a major step, much negotiating remains to be done to fully settle Britain’s EU divorce.
Even British officials admit the overall terms are closer to opening demands made by the EU, including the size of Britain’s exit bill, the breadth of protected citizen rights and commitments made regarding the Northern Ireland border.
However, the UK won significant compromises, most notably in rejecting demands from Brussels that Britain submit in some areas to the direct jurisdiction of EU courts after Brexit.
The final deal commits the UK to honouring outstanding EU liabilities when they fall due over coming decades, with the UK share calculated “as if the UK had remained a member state”. This includes budget commitments signed off up to two years after Brexit.
Although the agreement contains no figures, during talks the UK estimated a net payment of €40bn to €45bn while the EU put it at about €55bn. When contingent liabilities, such as loans to Ukraine, are added the bill rises to an estimated €55.5bn to €65.5bn.
A second pillar of the deal largely enshrines existing EU residence and social security rights of 3m EU citizens in the UK, and about 1m UK nationals living on the continent.
The settlement allows an EU national to claim permanent residence in the UK, retain most family reunion rights enjoyed today and, if eligible, to claim UK benefits even if they or their children move overseas. Some EU family rights in Britain are restricted, however, to match those of UK citizens who want to marry foreign nationals.
Britain secured a significant concession during talks by forcing the EU to drop its demand that the divorce settlement fall under the direct jurisdiction of the European Court of Justice.
However, in a compromise that has alarmed some Brexiters, Britain did pledge to indefinitely pay “due regard” to relevant European court rulings on citizens’ rights enshrined in the treaty.
For at least eight years, British courts can also refer questions over EU law to Luxembourg for rulings. After the cut-off date, courts would still respect the accumulated case law in this area.
Additional reporting by Henry Mance and Laura Noonan in London
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