Sunak announces 'Windsor Framework' deal on Brexit, sterling gains
Sterling rose on Monday after Prime Minister Rishi Sunak said he had agreed a new Brexit deal for Northern Ireland with European Commission President Ursula von der Leyen.
Sunak said the agreement - which he referred to as the new 'Windsor Framework', as that's where it was struck - was a "historic" and "decisive breakthrough". It "delivers smooth-flowing trade within the whole of the United Kingdom, protects Northern Ireland's place in our union and safeguards sovereignty for the people of Northern Ireland", he said.
The deal includes green and red lane trade routes, depending on whether goods are staying in the UK or might travel on to the EU.
It will also involve UK VAT and excise changes in Northern Ireland, whereby British products such as food and drink will be available in Northern Ireland. In addition, pet travel requirements have been removed.
The agreement delivers a "landmark settlement" on medicines. Sunak said that from now on, drugs approved for use by the UK’s medicines regulator will be automatically available in every pharmacy and hospital in Northern Ireland.
The agreement also introduces a new ‘Stormont Brake’ to safeguard sovereignty in NI. It gives the Northern Ireland Assembly in Stormont the ability to pull an "emergency brake" if it disagrees with an EU goods law which "would have significant, and lasting effects on everyday lives".
Sterling jumped on the news and by 1650 GMT, was trading up 0.7% against the dollar at 1.2026.
Susannah Streeter, head of money and markets at Hargreaves Lansdown, said: "There’s extra jaunt to the upbeat mood on the markets now that a deal to break the trade impasse between the EU and the UK has finally been struck.
"The pound has jumped above $1.20 in a small relief rally that the deadlock has been broken, but there is still a long way to go before these better relations will herald a significant recovery in cross border trade.
"Brexit has cast such a long shadow over the UK economy, that the lights of opportunity will need to shine more brightly before the pound undergoes a big further rebound. It’s still down some 14% on its pre-pandemic level as the strength of the dollar continues to limit gains, given interest rates expectations in the US.
"Against the euro, it’s still down 5% compared to three years ago. This new consensual approach should help for other thorny political problems, such as migration, but it’s unlikely to move the dial much for a big uplift to UK exports immediately. Nevertheless, a picture of improvement is being built up bit by bit and will add to hopes that any recession ahead will be milder."