Pound against Euro exchange rate: Sterling surges on last-gasp Brexit trade deal

Lloyds Banking Group was up 5.4% or 2.08p to 39.22, taxpayer-backed NatWest up 2.7% or £3.50 to £170.45 and Barclays gaining 3.6% or £5.54 to £157.36. 

Housebuilders Persimmon, Taylor Wimpey and Berkeley Group, clothes retailer Next and British Airways owner IAG were also among the main beneficiaries.

Johnson had been expected to appear before the TV cameras in Downing Street this morning after a phone call with European Commission president Ursula von der Leyen to finalise the deal.

However, as the hours rolled by there were suggestions of a last-minute hitch.

The delay meant  the FTSE 100 had already fallen back from its morning rally, to close up just 0.1% or 6.36 at 6,502.11.

The domestically focused FTSE 250 index, considered a proxy to Brexit sentiment, fared better, closing up 248.92 points, or 1.23%, at 20546.68.

But the standout performer was the pound, which has enjoyed a steady rise against the dollar since Monday when it sank to 1.320 amid fears Brexit talks had run into the ground. 

It was expected to gain further ground this evening as leaders from across UK industry welcomed the announcement. 

Tony Danker, CBI director general, said: "Firms will immediately study the details, when they can, to understand the implications for their companies, customers and clients but immediate guidance from government is required across all sectors.

"Above all, we need urgent confirmation of grace periods to smooth the cliff edge on everything from data to rules of origin and we need to ensure we keep goods moving across borders."

He said the UK has a bright future outside the EU following the deal, adding: "This will come as a huge relief to British business at a time when resilience is at an all-time low. But coming so late in the day it is vital that both sides take instant steps to keep trade moving and services flowing while firms adjust. And with a deal secured we can begin our new chapter on firmer ground."

Catherine McGuinness, policy chair at the City of London Corporation, said: “We are very pleased that both UK and EU negotiators have finally been able to come to a free trade agreement. This is positive news that – subject to ratification – opens a new chapter and provides long-awaited certainty for businesses and households on both sides of the Channel at a vital moment.

“We hope it can lay the foundations for a collaborative future partnership as independent partners. We also urge both sides to continue to work on other outstanding issues, including agreeing a framework for regulatory and supervisory cooperation and granting data adequacy.  

“A constructive relationship between the UK and EU will be vital to address joint challenges and opportunities such as the digitisation of the economy and climate change.”

Helen Dickinson, chief executive of the British Retail Consortium, said: "After years of campaigning for zero-tariff trade, we welcome the announcement of a free-trade agreement between the UK and EU.

"Given that four-fifths of UK food imports come from the EU, today's announcement should afford households around the UK a collective sigh of relief.

"The UK and EU Governments have taken a crucially important step in agreeing a zero-tariff agreement, to the benefit of customers all over Europe. They must now work to implement this new arrangement as soon as possible, ensuring there are no tariffs from day one, and finding new ways to reduce the checks and red tape that we'll see from January 1."

Richard Burge, chief executive of London Chamber of Commerce and Industry, said: "There are likely to still be questions unanswered and operational detail missing. The negotiations running this late in the day have not helped, so I hope both the Government and the EU will be open-minded regarding working together to cushion the impact of the change in relationship, wherever possible."

Jasmine Whitbread, chief executive of London First, said:“There will be sighs of relief all round that the Government has finally done what it set out to do, and agreed a future trade deal with the EU.

Jasmine Whitbread, chief executive of London First, said: “There will be sighs of relief all round that the Government has finally done what it set out to do, and agreed a future trade deal with the EU.

“With a deal in place, firms can focus on making it through the pandemic and safeguarding jobs, in the knowledge that they won’t suddenly be cut off from our biggest trading partner.

“However, there is now precious little time for businesses to adapt to the changes they will need to make and at a time when many are reeling from tier four restrictions. The UK Government must provide as much support as possible to firms in the months ahead.”

Stuart Lisle, chair of accountancy firm BDO’s Brexit taskforce said: “The lateness of the hour won’t dampen the feeling of immense relief among many in the business community that a comprehensive Free Trade Agreement has been struck with EU.  

 “While the outcome won’t please everyone, the return of some certainty into the business planning process and the removal of much of the friction that could have been suffered throughout supply chains will be hugely welcome."

Hinesh Patel, portfolio manager at Quilter Investors, said:  “The news of a deal is a welcome Christmas surprise after four and a half years of endless back and forth. Despite all the headlines around fisheries and old economy sectors causing tension, it appears the sectors that are going to drive the new economy, such as electric vehicles and batteries, were also front and centre in the negotiations highlighting just how important these industries now are to the UK and EU.

“The devil will of course be in the detail so it is too early to declare winners or losers just yet, but the real benefit of this news is the end to four years of ‘suspended animation’ and an opportunity to move beyond the bluster we have been hearing since the referendum campaign began."

 Fiona Cincotta, from City Index UK, said: “Those stocks that are closely tied to the health of the UK economy are the ones where we expect to see a reflection of this optimism. We saw it yesterday as the rumours were coming through with strong performance in domestic banks, housebuilders and retailers with the idea of an easier supply chain. These are the sectors which could do well today.”

She described the sentiment sweeping the City as: “Relief that we got there. Sheer relief that we’ve hopefully got something agreed after a long four-and-a-half years.”

UK markets will close early on Thursday and remain closed for Christmas and Boxing Day on Friday and Monday.