At Last, A Deal...

For all the bluster and brinkmanship, there was never any real doubt that a breakthrough would eventually be reached. There was simply too much money at stake in order for No Deal to become a permanent state of affairs. So long as the two sides continued talking, there was only ever going to be one outcome to the latest round of Brexit negotiations. And so it proved, when late on Christmas Eve it emerged that an EU-UK Free Trade Agreement had finally been agreed. Just in time to avert the catastrophe of a WTO Brexit for which the UK was emphatically not ready.

In recent weeks, many on the UK side of the English Channel have doubted that an agreement would ever be reached. There was a point in early December that the doubters looked to be correct, yet the Northern Ireland Protocol concluded on the 9th December showed that common ground could be found on even the most fraught of issues. After that point, every missed deadline and high level phone call caused the odds of a deal to increase in the betting markets. It was only a matter of time.

Ultimately, the new free trade agreement was too little too late for many businesses. British access to the single market has been reduced, and UK firms still aren't clear on the cross-border trading arrangements they'll be dealing with next week. The decision not to extend the transitional arrangements was a political one, designed to protect Boris Johnson's position as Conservative Party leader. There was a negotiating logic to it as well. Boris is on record as saying that a deal would only be possible at the 11th hour, and that delaying the end of the transition period would only prolong the negotiations and the accompanying uncertainty. So, it has proved.

The last minute nature of the deal has undoubtedly helped sell it to sceptical politicians on both sides of the channel. The UK Labour Party is backing the agreement because the only possible alternative is No Deal, although a substantial rebellion from hardline Remainers on the Labour benches is expected. So far, the hardline Brexiters on the Conservative backbenches have been silent too. Some will vote against, but Nigel Farage's lukewarm endorsement of the agreement implies that it will easily pass the House of Commons.

The Thin Red Line

The UK Government had to make plenty of compromises and break some red lines, but so did the EU. It's likely, the EU got a slightly better deal, but then that was always expected. Size matters a lot in trade negotiations. Both sides have secured tariff-free, quota-free trade for the foreseeable future while allowing a limited amount of regulatory divergence so long as it does not impact the economic competitiveness of the other party. That's not the Singapore-on-Thames style regulatory bonfire dreamed of by the Conservative right, but such ambitions were a pipe dream anyway. There simply isn't any appetite among the UK public for a shift away from the European social model.

The EU broadly got their wish for a level playing field, as well as the ability to update the deal as regulations change. The UK got the sovereignty and independence from the European Court of Justice that animated Conservative opposition to EU membership in the first place, while also ending freedom of movement for the working class voters who won them the 2016 Brexit Referendum to begin with. There will be an economic cost to Brexit, but the OBR's guess that the UK will forgo 4% of GDPR over a decade is considered a reasonable tradeoff by most Brexiters.

The big loser is the UK fishing industry, who were sold out in order to protect UK Car and Aerospace manufacturing. There has been protest from industry groups around this, even though it was a predictable outcome. Fisheries is much more important to France and Spain than the UK. The other big talking point has been the fate of the Erasmus student exchange scheme, which the UK declined to join for cost reasons. The top Russell group universities are said to be relaxed about this, so long as the replacement Turing Scheme is launched as promised. The UK receives far more students than Erasmus than it sends due to language and reputation, so vice chancellors hope that many former Erasmus students will be replaced with overseas students paying full tuition fees.

Of course, hastily drafted free trade agreements don't last forever as the fate of NAFTA shows. Some Tory hardliners are backing this deal so they can tear it up later. Already, the UK and the EU are looking forward to the next round of negotiations on services. The current arrangements on financial services are transitional, so there is a need to secure permanent access to EU financial markets before those arrangements expire in June 2022. Other parts of the UK service sector also lost out in the rush to reach a deal, and will probably get covered in subsequent talks.

The War is Over

There will be some domestic battles in getting the current deal ratified by national Parliaments over the next few months, but Brexit is now over for all intents and purposes. Farage's response to the agreement was telling. "The War is Over," he declared in a video message posted over Christmas. He's right. The usual sources on the Remain side are protesting about the deal's economic costs, but they represent only a small minority of remain voters.

After two years of political crisis, the British public is in the mood for some normality. Most remainers understand the benefits of Brexit and want the post-pandemic recovery to realise the opportunities presented by leaving the EU. The government's efforts in securing trade deals are beginning to bear fruit, and public concern about immigration has disappeared in the last five years. Rejoin is going to be a distinctly niche concern for the next couple of decades.

The inevitable post-Brexit teething issues will be blamed on the lack of competency already shown in response to Coronavirus. This will help bed in the post Brexit settlement because failures can be blamed on either the pandemic or individual ministers that have already been shown to be out of their depth. So long as Boris can demonstrate some concrete benefits of Brexit through reduced regulation, more flexible trade deal or a more active industrial policy, then the partisan divide exposed in 2016 will start to heal.

Ironically, the chief beneficiary of post Brexit politics will be Keir Starmer, who is distrusted by leave voters because of his past backing for the doomed second referendum campaign. Labour needs the country to move on before it can win another election. They've been creeping up in the polls recently, but will no doubt slip back due to the deal. Watch events in Scotland though, because the next big constitutional crisis is brewing north of the border. Another independence referendum could yet change things again.