A very Merry Christmas to all!

Sources in London and Brussels said a deal was close as British Prime Minister Boris Johnson held a late-night conference call with his senior ministers, and negotiators in Brussels pored over reams of legal texts.

There was no official confirmation of a deal but Johnson was expected to hold a news conference – just seven days before the UK turns its back on the EU’s single market and customs union at 2300 GMT on 31 December.

“Certainly the momentum and the expectation is that we will get a Christmas Eve Brexit deal and I can tell you that will be an enormous relief,” Irish Foreign Minister Simon Coveney told RTE radio.

Haggling over just how much fish such as sole, sand eels and herring EU boats should be able to catch in British waters was delaying the announcement of one of the most important trade deals in recent European history.

“There is some sort of last-minute hitch” related to “small text” of the fisheries agreement, Coveney said.

News that a deal was imminent, first reported by Reuters on Wednesday, triggered a 1.4% surge in the pound against the dollar. Bond yields rose across the world. [GBP/] [US/] [GB/] [FRX/] [GVD/EUR]

The United Kingdom formally left the EU on 31 January but has since been in a transition period under which rules on trade, travel and business remained unchanged. But from the end of this year, it will be treated by Brussels as a third country.

If they have struck a zero-tariff and zero-quota deal, it would help to smooth the trade in goods that makes up half their $900 billion in annual commerce. It would also support the peace in Northern Ireland – a priority for U.S. President-elect Joe Biden, who had warned Johnson that he must uphold the 1998 Good Friday peace agreement.

Even with an accord, some disruption is certain from Jan. 1 when Britain ends its often fraught 48-year relationship with a Franco-German-led project that sought to bind the ruined nations of post-World War Two Europe together into a global power.

After months of talks that were at times undermined by both COVID-19 and rhetoric from London and Paris, leaders across the EU’s 27 member states have cast an agreement as a way to avoid the nightmare of a “no-deal” exit.

But Europe’s second-largest economy will still be quitting both the EU’s single market of 450 million consumers, which late British prime minister Margaret Thatcher helped to create, and its customs union.

When the UK shocked the world in 2016 by voting to leave the EU, many in Europe hoped that it could stay closely aligned. But that was not to be.

Johnson, the face of the 2016 Brexit campaign, asserted that, since 52% had voted to “take back control” from the EU, he was not interested in accepting the rules of either the single market or the customs union.

The EU did not want to give unfettered privileges to a freewheeling, deregulated British economy outside the bloc, and so potentially encourage others to leave.

The result was a tortuous negotiation on a “level playing field” in competition – which the EU demanded in return for access to its market.

If there is a deal, it will cover goods but not the financial services that make London the only financial capital to rival New York. Services make up 80% of the British economy.

In essence, the agreement is a narrow free trade deal surrounded by other pacts on fisheries, transport, energy and cooperation in justice and policing.

Despite the agreement, goods trade will have more rules, more red tape and more cost. There will be some disruption at ports. Everything from food safety regulation and exporting rules to product certification will change.

The UK, which imports about $107 billion more a year from the EU than it exports there, bickered until the end over fish – important for Britain’s small fishing fleet but worth less than 0.1% of GDP.

Access to the EU market for London-based banks, insurers and asset managers is being handled outside the deal and will, from Jan. 1, be patchy at best.

In essence, what was the EU’s most ambivalent member is exiting the bloc’s orbit on New Year’s Eve for an uncertain future with a trading relationship that is, at least on paper, distant.

At the stroke of midnight in Brussels, both sides will be diminished.

The EU loses its principal military and intelligence power, 15% of GDP, one of the world’s top two financial capitals and a champion of free markets that acted as an important check on the ambitions of Germany and France.

Without the collective might of the EU, the United Kingdom will stand largely alone – and much more reliant on the United States – when negotiating with China, Russia and India. It will have more autonomy but be poorer, at least in the short term.

With an economy just one-fifth the size of the remaining EU, Johnson needs a trade deal to minimise Brexit disruption as the novel coronavirus has hurt the British economy more than it has damaged other major industrial powers.

The Bank of England has said that, even with a trade deal, Britain’s gross domestic product is likely to suffer a 1% hit from Brexit in the first quarter of 2021. And Britain’s budget forecasters have said the economy will be 4% smaller over 15 years than it would have been if Britain had stayed in the bloc.