UK and EU agree to reset relations after Brexit exit in 2020, sources say - CNBC

The U.K. and European Union finally agreed to reset relations Monday, sources told CNBC, after Britain's acrimonious exit from the European bloc in 2020.

 

U.K. Prime Minister Keir Starmer is hosting European Commission President Ursula von der Leyen and other senior officials in London for a much-anticipated summit which is taking place against a backdrop of unpredictable global dynamics — led by the U.S.

 

Three EU officials told CNBC's Silvia Amaro Monday that the global powers had reached a deal. One stated that reciprocal access to fishing waters had been agreed upon until June 30, 2038, with a deal also made on energy cooperation and the conclusion of the security and defense partnership.

 

It comes after talks between both sides intensified in the run-up to the gathering at Lancaster House in central London, with last-minute haggling over emotive issues, including a youth mobility scheme and fishing rights.

 

Discussions between the U.K. and EU's teams went on past midnight, Sky News reported, with one person describing Sunday as a "crazy" day of ups and downs. A press conference will be held at 12:30 pm London time Monday.

 

Mujtaba Rahman, managing director of Europe at Eurasia Group said ahead of the summit that the deal was likely to pave the way for the U.K.'s participation in EU security and defense policy, including defense industrial policy.

 

He also said it was likely to include an agreement "to remove friction on trade in agrifoods ... and a role for the European Court of Justice in resolving disputes — progress on a youth mobility scheme and more cooperation on energy policy and carbon border taxes are likely as well."

 

The Trump administration's recent shift toward U.S. isolationism when it comes to global affairs, and particularly those more acutely affecting Europe, such as the war in Ukraine, make the case for an ambitious reset, Rahman noted.

 

But the U.K. will also be wary of an increase in support for Reform UK, the party belonging to Brexit architect, Nigel Farage.

 

Starmer's popularity has fallen to its lowest level on record, with just 23% of Brits polled having a favorable view of the prime minister, according to YouGov research released last week, while positivity toward Farage and Reform UK has risen.

 

A deal between the U.K. and EU was "there for the taking," Christopher Granville, managing director of Global Political Research at TS Lombard, said in emailed comments, but the big question is whether the U.K. government "will balk for fear of 'Reform UK'."

 

"This will be a revealing test of the political calibre of the Labour government close to one year after its huge election win."