Prime Minister Keir Starmer has unveiled the details of a new agreement with the European Union, which, according to the government, “will support British companies, British jobs and will put more money in people’s pockets.”
Among other things, the agreement will reduce administrative formalities on food and drinks exchanged across borders, a new security and defense partnership will be appropriate between the United Kingdom and the EU and will allow British holidaymakers to use more e-gate in Europe.
In return, EU fishing quotas were extended until 2038, giving European boats access to British waters. These were originally to expire in June 2026 following a post-Brexit agreement.
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The United Kingdom and the EU also agreed to continue discussions on a youth mobility program for 18-30 year olds and an Erasmus student exchange program.
This is the last in a series of agreements concluded between the United Kingdom and international partners in recent weeks.
A trade agreement with India, agreed earlier this month, should allow British companies to more easily export products such as whiskey and cars. A trade agreement with the United States has also reduced car export prices by 27.5% to 10% and from 25% to 0% on steel and aluminum exports.
Starmer claims that it is proven that Great Britain is “back on the world scene”-but will it be able to convince households, businesses and investors? Proof of pudding will ultimately be in a more robust level of GDP growth and investment entrances.
Production “should slow down considerably this year”, it is “crucial that the United Kingdom derives as many levers as possible to increase its growth prospects,” said Susannah Streeter, head of money and markets at Hargreaves Lansdown.
Will EU trade agreement increase British growth?
The EU is still the largest trading partner in the United Kingdom, but we have dropped 21% of exports to the region and a 7% drop in imports from Brexit, according to government data. Estimates from the Budget Liability Office suggest that Brexit has reduced productivity in the UK in the long term by 4%.
The agreement announced today (May 19) is far from being a reversal of Brexit – there is no return to the single market, the customs union or the free movement of people. However, it will allow the United Kingdom to start again to sell more products in the EU, including things like raw burgers and sausages.
The agreement should also reduce some of the administrative formalities that companies face.
The British Retail Consortium (BRC), a professional association, responded positively to the announcement. The changes to food and drinks “will help reduce costs and create greater security in retail supply chains, guaranteeing continuous availability of key food imports for British buyers,” said Helen Dickinson, CEO of BRC.
“In addition to supporting the growth of exporters to the largest export market in the United Kingdom, retailers operating in the EU will also see an enormous reduction in unnecessary processes, documents and administrative burden during the export of goods, supporting our competitiveness abroad.”
Combined with another aspect of the energy trading agreement, number 10 indicates that measures will add nearly 9 billion pounds to the British economy by 2040.
A welcome help – but “no game” for the economy
While today’s agreement is a positive first step, economists of the financial institution Badge argue that it “will not massively stimulate the economy or not help avoid tax increases in the fall”. Food exports and animals are simply not a sufficiently large part of the British economy in its own right.
Despite this, the agreement indicates a significant improvement in the United Kingdom-EU relations. The tone of the press conference was warm. We talked about “new chapters” and “shoulder on the shoulder” standing. The president of the European Commission Ursula von der Lyon even recalled with emotion the time spent in London as a student.
If the United Kingdom uses this platform to negotiate a narrower alignment elsewhere, ING thinks that it could unlock 10 billion pounds sterling or more in tax height.
“The next obvious step would be that the United Kingdom is part of the EU regulations on products beyond agriculture,” said James Smith, business market economist. “In theory, this should not be too difficult, since the United Kingdom has not used its autonomy much to modify these rules. The “CE” brand- showing good compliance with EU regulations- is always generally accepted in the United Kingdom. “
If this change comes into play, Smith thinks that the OBR could be convinced to revise its annual growth forecasts of 0.1% per year, which led to more than 10 billion pounds of the tax margin.
By putting these figures in context, he added: “An supplement of 10 billion pounds sterling is roughly the increased income with an increase in a percentage of points in the national insurance of the employer, or a little more than an increase of 1 percentage in the basic rate of income tax, according to estimates of the British Treasury.”
What could the United Kingdom agreement for investment markets mean?
The FTSE 100 closed 0.2% more after the announcement of the United Kingdom agreement on May 19, while the FTSE 250 more focused on the country was closed by 0.1%.
It should be noted that any help from the trade agreement may have been thwarted by other factors on the world scene. Moody’s reduced his triple-a note for the United States on Friday, attenuating the feeling in the world markets on Monday morning.
Although the immediate impact is difficult to disentangle, an agreement should be good news for investments in the UK in the longer term.
“The British voted for Brexit in 2016 and the following governments sought to implement it, but the financial markets never liked it.
“A greater desire to engage and seek compromise with the EU can reconquer a little of this lost faith, and the assets denominated in sterling can be able to glean a little of how investors are starting to question the dollar and the concept of American exceptionalism,” he added.
Placement managers hope to see this result in entries in the coming months. British equity funds have bled assets from Brexit, with outings from the sector totaling 4.2 billion pounds sterling in the first quarter of only 2025, according to the Association Investment.
Some analysts believe that we could see a change given recent volatility in the United States. For the first time in a long time, the FTSE 100 has considerably exceeded the S&P 500 so far this year. The London Blue Chip index is increasing by more than 6% over a year, while the S&P 500 is up more than 1%. After almost a decade in short, the British market could also offer better evaluation opportunities.
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