How the Brexit deal was done — and what happens next

As businesses adapt to the UK’s new trade deal with the EU, negotiators on both sides reveal what really happened

George ParkerPeter FosterSam Fleming and Jim Brunsden

The Brexit denouement had finally arrived. As the year drew to a close, Boris Johnson stood triumphant in the House of Commons and proclaimed the rebirth of Britain as “an independent nation” on the brink of a free-trading future.

“We are going to open a new chapter in our national story,” he declared on December 30, as MPs approved his EU trade deal, secured on ­Christmas Eve after months of painful negotiations with Brussels.

But as his bright new dawn for Britain broke in 2021, the impact of Johnson’s deal was already being felt in the real world. David Howson, president of Cboe Europe, one of London’s biggest exchanges, sat at his computer and watched stunned as €6bn of EU share dealing shifted away from the City to facilities in European capitals. “Having been in this industry for over 20 years, I’ve never seen a ‘Big Bang’ liquidity transition of this type before in share trading and I hope it’s not something I have to experience again,” he says.

Meanwhile, at Aston Chemicals in Aylesbury, the doors slammed shut on its final shipment to the EU. After more than 30 years of exporting to the European cosmetics industry, the bureaucracy introduced by the Brexit trade deal had rendered the trade uneconomic. “It was emotional but we had no choice,” says Aston’s managing director Dani Loughran, after packing off the last driver with a box of Tunnock’s tea cakes. The company will now serve its EU ­customers from Poland.

Almost 200 miles away at Brixham on the Devon coast, Ian Perkes contemplated the possible collapse of his venerable fish and shellfish exporting business. Where once there was an open border to his main market in the EU, Perkes now sees only obstacles. Like his furious counterparts in Scotland, he has had to halt exports because of the complexity of securing the right paperwork — he discovered he needs to hire a French accountancy firm — and delays at the border. “This time last year we had £85,000 of export sales in the first days of January,” he says from his office overlooking the harbour. “This year — zero.”

“There will be no non-tariff barriers to trade,” declared Johnson on Christmas Eve. But that was not accurate, nor was it ever going to be. As Pascal Lamy, former head of the World Trade Organization, noted last year: “This will be the first negotiation in history where both parties started off with free trade and discussed what barriers to erect.”

The bill for Johnson’s relentless focus on sovereignty is now due. The government’s deal does allow for the continuation of tariff-free trade for goods that qualify as British- or EU-made. However, Britain’s exit from the customs union and single market on January 1 created a thicket of customs declarations, health checks and other barriers to trade. Services, which make up 80 per cent of the British economy including its crown jewel — the City of London — barely get a look-in.

Michel Barnier, the EU’s chief Brexit negotiator, recently told reporters that Britain had simply got what Johnson asked for. “There are mechanical, obvious, inevitable consequences when you leave the single market and that’s what the British wished to do,” he said.

Johnson insists that by breaking out of the “orbit” of the EU regulatory system he can build a new, agile British economy, developing rules to allow the UK to become a centre for industrial sectors such as robotics, artificial intelligence and biotech, while igniting a second “Big Bang” for the City of London, beyond the dead hand of Brussels. “We will be free of EU state aid rules, we will be able to decide where and how we level up across our country,” he told MPs on December 30.

Johnson had delivered the pure form of Brexit he promised Leave voters. MPs approved the deal by 521 to 73, with most Labour MPs viewing a “thin” trade deal as better than none. Even the most Eurosceptic Tories were buoyant. “We finally have a deal which facilitates tariff-free, quota-free UK/EU trade to our mutual economic advantage,” says Mark Francois, chair of the Tory Eurosceptic European Research Group.

For now though, the images of Boris Johnson’s Brexit are just as likely to be those of Scottish fishing boats lying idle, unable to export their catch; British rock stars claiming European tours could be wrecked by post-Brexit visa rules; or a British driver in a viral video clip, pleading with Dutch customs officers not to impound his ham sandwich. “Welcome to the Brexit,” smiles the officer. As the dust settles on Johnson’s long-awaited deal, two questions stand out: how did we get here and what happens next?

Link to the FT article