A breakthrough was made on Brexit negotiations on Friday. British Prime Minister Theresa May has agreed to honour the UK’s financial liabilities to the European Union. Payments worth €40 – €60 billion are due to the European Union as a fine for leaving the trading bloc. Additionally, May has agreed to protect the rights of Northern Ireland citizens, ensuring that that there will be no hard-Irish border.
Sterling climbed as investor’s fears of a no-deal Brexit subside. In early morning Friday, the UK government managed to make significant progress on Brexit negotiations with the EU. The breakthrough means Brexit talks can now move onto trade, one of the most pressing issues for the UK.
The pound is 0.03% higher against the dollar and 0.26% stronger against the euro. Traders are shunning UK government bonds, with the yield on the policy-sensitive 2-year gilt is up by 4.1 basis points.
The decision is seen as a breakthrough in an otherwise slow-moving negotiation process. Over the next week, the Prime Minster will present the deal, using the fine payments as leverage for trade agreements.
Negotiators are striving for significant progress on issues such as citizen rights, Northern Ireland and the financial settlement, before December’s summit.
If the EU accept May’s deal, talks can begin at the December 14th summit. Businesses are anxious to start trade talks and see more detail on what the transition period out of the EU will look like for Britain.
The ‘’Brexit bill’s’’ final figure will not be agreed upon for many years, due to liabilities that stretch far into the future, such as pensions. The UK aims to pay the fine in stages rather than a lump-sum, giving the nation a chance to redirect the funds.
May won the support of her cabinmate with the financial offer, provided that the Prime Minister locks in a good trade deal in the divorce proceedings.
The EU’s main objective has been to reclaim the liabilities accrued while the UK was part of the single market.