EU deal on protocol to be "positive catalyst" for UK - Davy

(Alliance News) - A UK and EU deal on Northern Ireland trade barriers will be reduce uncertainty on UK business and help boost investment, analysts at Davy said on Monday.

UK Prime Minister Rishi Sunak appears to be on the verge of agreeing a Brexit deal aimed at easing trade friction in Northern Ireland as he enters into "final talks" with the EU.

Sunak will meet European Commission president Ursula von der Leyen in Windsor, Berkshire, on Monday to discuss a "range of complex challenges" around the Northern Ireland protocol, Downing Street said.

"The deal will be a positive catalyst, reducing uncertainty for UK businesses and helping lacklustre business investment spending. However, shortcomings in the existing EU/UK trade deal, costly customs checks, will still hold back the UK's export performance," Davy analysts said.

"During often acrimonious EU/UK negotiations, the existing Brexit withdrawal agreement has threatened to unravel. The European Commission had even drawn up potentially retaliatory trade measures if the UK continued to fail to implement the Northern Ireland protocol. UK businesses may now have clarity that the zero-tariff trade deal on goods will remain in place, potentially unlocking investment. Since the Brexit referendum in 2016, UK business investment has lagged behind other countries – now close to 20% below the G7 average."

No 10 raised the prospect that the talks could produce a breakthrough moment after months of negotiations with Brussels about fixing the protocol.

Conservative Eurosceptics have warned the "devil is in the detail", however. Even if long-awaited changes to the Northern Ireland protocol are agreed, it is likely to be only the start of the most challenging week of Sunak's premiership.

He wants to win the support of the Democratic Unionist Party so they agree to restore power-sharing in Northern Ireland to get Stormont back up and running.

Conservative Brexiteer Jacob Rees-Mogg put Sunak on notice of a possible Tory revolt if the DUP does not support the deal, despite major concessions expected from the EU.

The former cabinet minister told GB News: "It will all depend on the DUP. If the DUP are against it, I think there will be quite a significant number of Conservatives who are unhappy."

Davy added: "The question now is whether Sunak has secured agreement from his own MPs and the DUP."

Davy believes a deal this week will be unlikely to boost the UK's "poor export performance".

"The UK's withdrawal agreement is far from perfect, with goods exports to the EU undergoing customs checks and other costly controls. The services sector is barely covered, with no passporting rights for financial services. So today's deal is unlikely to help the UK’s poor export performance – evident since exit from the EU single market in 2021," Davy added.

"However, Labour Party leader Keir Starmer is unlikely to lead on the issue as he aims to win back Brexit-voting 'red-wall' constituencies in the next election."

The pound was quoted at USD1.1958 early Monday, higher than USD1.1947 at the London equities close on Friday.

By Eric Cunha, Alliance News news editor

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