Brexit: EU can move talks onto second phase as Ireland border deal agreed

As part of the new agreement, the UK will maintain “full alignment” with the rules of the EU single market and customs union which support cross-border cooperation and create “no new regulatory barriers”.

“We have now made the breakthrough we needed," Commission president Jean-Claude Juncker told reporters at an early breakfast briefing on Friday, crucially confirming that "sufficient progress has now been made on the strict terms of the divorce".

This paves the way for May to gain approval from the European Council of 27 remaining member states at next week's summit, from 14-15 December in Brussels, which will allow negotiators to begin drafting the final withdrawal agreement.

May said the deal was in “the best interests of the whole of the UK” and will guarantee the rights of UK citizens in the EU and the three million EU citizens living in the UK will have their rights "enshrined in UK law and enforced by British courts".

She said the deal included a financial settlement which was “fair to the British taxpayer” and a guarantee that there will be “no hard border” between Northern Ireland and the Republic, preserving the “constitutional and economic integrity of the United Kingdom”.

After objecting to May's proposed text for a deal with the EU, the DUP said on Friday that six "substantive changes" had been made this week, sufficient for it to support the new agreement.

“We have the very clear confirmation that the entirety of the United Kingdom is leaving the European union, leaving the single market, leaving the customs union,” DUP leader Arlene Foster told Sky News.

A spokesman for the Irish premier Leo Varadkar said: "We achieved all our goals in phase one of the negotiations, including preserving the CTA, protecting the GFA and, crucially, obtaining a guarantee that there will be no hard border."

NEXT STAGE WILL BE EVEN HARDER

Having now received the recommendation that talks should move on, European Council president Donald Tusk said negotiations should now begin on the transition period, which the UK has requested should last two years.

He hailed the reaching of an agreement but warned: “The most difficult challenge is still ahead...We all know that breaking up is hard. But breaking up and building a new relation is much harder."

Reactions from the UK business community were mostly positive, with Adam Marshall, director general of the British Chambers of Commerce, saying firms will particularly cheer the mutual commitment to a transition period to support business confidence and trade, but will need details confirmed swiftly in the new year when trade talks begin.

On the question of citizens’ rights, and the status of EU employees in UK firms, Marshall added: “The biggest priority for many firms since the EU referendum has been to get clarity and security for their European employees, whose contribution to business success across the UK is hugely valued. We are delighted that they, as well as UK citizens living and working in the EU, now have more clarity and can plan their future with greater confidence.”

London Mayor Sadiq Khan however said it was "extremely disappointing" that May was still insisting that Britain will leave the single market and customs union. "Staying in both is without a doubt the best long-term solution for London and Britain.

"Despite the progress today, it looks increasingly unlikely that we will get a deal that works in London's best interests and protects jobs and growth across Britain."

MARKET REACTION: POUND FLIES

The pound surged to a six-month high against the euro, rising 0.5% to 1.1499, and up 0.2% against the dollar to 1.3505.

"This morning’s deal looks like a classic eurozone can kicking exercise," said analyst Ranko Berich at forex broker Monex Europe.

"It’s now clear that Britain is seeking an agreement on regulatory alignment that will mean the overarching UK wide deal will satisfy Northern Ireland’s requirements. But in the plausible scenario where such a deal is not reached, today’s fudge hinges on Britain coming up with unspecified “specific solutions” that will avoid a hard border in Ireland."

But he said the "fudge" has gone down a treat for sterling, with sterling trading up against almost all major partners.

"Regardless of any future difficulties, for now the news is very positive, and next week’s leaders’ summit will conclude in celebrations, which the pound has already kicked off this morning."

Oanda analyst Craig Erlam said: "There has been numerous times when an agreement looked difficult or even unlikely before year-end which would have made achieving a trade deal by March 2019 very tough. Today is a hugely significant step forward towards exiting the EU in 2019 and while both sides will be relieved at the progress, many more tough negotiations lie ahead. But we can’t underestimate how important today is."