EU, UK agree Brexit deal but DUP rejects proposals
Pound soars vs euro, dollar as compromise reached on Ireland
Britain and the European Union agreed a Brexit deal with a compromise reached on the contentious Northern Ireland border even though the Democratic Unionists refused to support it.
Both sides hailed the deal, with European Commission President Jean-Claud Juncker calling it a "fair and balanced agreement".
However, UK Prime Minister Boris Johnson now faces an uphill battle to get it through parliament and will have to hope the 21 Conservative MPs he sacked last month and enough leave-supporting Labour MPs vote in favour.
The DUP, which has 10 seats in the House of Commons, said the deal "drives a coach and horses through the professed sanctity" of the Good Friday Northern Ireland peace agreement.
"For all of these reasons it is our view that these arrangements would not be in Northern Ireland’s long term interests. Saturday’s vote in parliament on the proposals will only be the start of a long process to get any withdrawal agreement bill through the House of Commons," the party said in a statement.
The pound soared immediately on the news, rising 0.37% against the euro to 1.163 and 0.7% versus the dollar to 1.2930 - a new five month high for the embattled currency.
"We now have a newly agreed protocol that protects peace and stability on the island of Ireland and fully protects our single market. I hope that we can now bring this over the line and provide the certainty our citizens and businesses so deserve,” Juncker said in a statement.
Chief EU negotiator Michel Barnier said Northern Ireland would stay in the EU single market for goods while bloc’s customs code would apply to goods coming from Great Britain into Northern Ireland.
“Northern Ireland will remain aligned to a limited set of EU rules notably relating to goods. This means that all applicable procedures on goods will take place at points on entry into Northern Ireland and not across the island.”
The two sides agreed that no duties would be be payable for goods brought into Northern Ireland from another part of the United Kingdom "by direct transport...unless that good is at risk of subsequently being moved into the Union, whether by itself or forming part of another good following processing".
Capital Economics chief economist Paul Dales said if a deal was ratified by all sides the pound could rise further to around $1.35 with a "gradual rebound" in business investment boosting GDP growth from 1.3% this year to around 1.5% next year and to about 2.2% in 2020.
"If so, the Bank of England may gradually raise interest rates from 0.75% to around 1.50% by the end of 2021. That could lift 10-year gilt yields from 0.75% now to about 2.00% and push the pound up further to about $1.40 in 2021," he said.