U.S. Markets closed

EU and UK negotiators reach breakthrough on Irish border

Edmund Heaphy
Ireland Correspondent
Both sides have agreed to text on the Irish border. Pic: Reuters

Negotiators from the UK and European Union have come to an agreement on the highly contentious Northern Ireland backstop, in one of the most significant breakthroughs for Brexit talks in months.

Downing Street has confirmed that a draft text has been agreed upon.

The future of the border in Northern Ireland has been the last major outstanding issue to be settled amid disagreements over how to avoid physical checks until a future trading relationship with the bloc is determined.

Earlier today, a range of media reports, from the BBC to Irish national state broadcaster RTÉ, said both sides of the negotiating table have agreed on a solution for the border on a technical level.

RTÉ said that the text provides for just one backstop to prevent a hard border, and will come in the form of a temporary UK-wide customs arrangement that will include specific provisions for Northern Ireland. These provisions will “go deeper on the issue of customs and alignment on the rules of the single market than for the rest of the UK,” RTÉ reported, and will include some form of a review mechanism.

The text is thought to contain “annexes” for Northern Ireland that will come into force if the UK-wide arrangement does not prove sufficient.

A range of reports say that a special cabinet meeting will be held at 2pm local time on Wednesday (14 November), as prime minister Theresa May seeks support from politicians. She is, however, holding one-on-one meetings with cabinet members this evening.

A spokesperson for Irish foreign affairs minister Simon Conveney said on Tuesday evening that negotiations “are ongoing and have not concluded. Negotiators are still engaged and a number of issues are outstanding. We are not commenting further on leaks in the media.”

RTÉ reported, however, that the Irish cabinet will meet on Wednesday to consider the text of the withdrawal agreement, citing an unnamed government source. It is thought that the Irish government wanted to give May and her cabinet time to consider the proposal before responding.

Similarly, the European Commission insisted that a deal had not yet been finalised, even as an EU diplomat told Yahoo Finance UK that preparations for an emergency November summit of EU leaders were being made behind the scenes.

EU ambassadors were due to meet tomorrow to discuss the bloc’s preparations for a no-deal Brexit, but they will now also be briefed on the state of play in negotiations.

It is not yet known how May will square the proposals with Northern Ireland’s Democratic Unionist Party (DUP), whose 10 lawmakers prop up her government in the House of Commons.

On Tuesday evening, the leadership of the DUP briefed journalists in Westminster on the party’s opposition to the proposed withdrawal agreement, as did Conservative MPs from the right-wing European Research Group, which is led by Jacob Rees-Mogg.

The DUP has long been opposed to a Northern Ireland-specific backstop, since it could result in Northern Ireland being more closely aligned with the EU’s customs and trade rules than the rest of the UK.

The UK pound surged on the news of a deal, hitting a 7-month high against the euro at €1.15, and spiking just above $1.30 versus the US dollar.

Photo: Yahoo Finance UK

However, Richard Falkenhäll, a senior FX strategist at Nordic corporate bank SEB, warned earlier today that while the pound naturally jumps on the prospect on a deal being sealed, it all comes down to whether the agreement May secures is passed through parliament.

“A battered GBP has reacted positively on improving prospects of a deal between the EU and the UK during the last few weeks,” said Falkenhäll.

“However, conflicts within the British government as well as in Parliament, which make the outcome of the coming Brexit vote in Parliament uncertain, is another obstacle that has to be passed before a deal is fully secured. Only then can we expect a sustained GBP recovery as the Brexit risk premium should fall.”

Brussels correspondent Luke James contributed reporting.