Sterling and stock markets moved higher after the Prime Minister and European Commission president Ursula von der Leyen agreed a breakthrough deal on trade with Northern Ireland.

Rishi Sunak will be in Belfast today hoping that the agreement will meet the demands of the Democratic Unionist Party and allow government to resume at Stormont. It also eases concerns in the US about political stability in the province.

Mr Sunak is receiving positive noises from Brexit hardliners in his own party. David Davis, the former Brexit secretary, said the Prime Minister had achieved a “spectacular negotiating success”.

Labour Sir Keir Starmer said that his paty would vote for the deal, as did the Scottish National Party which has previously expressed concern over any agreement that allows Northern Ireland to benefit from the EU over and above the rest of the UK.

The proposal will allow British goods destined to remain in Northern Ireland to be treated differently from those moving into the Republic of Ireland and the European Union’s single market.

It aims to resolve the problem of British goods sent to Northern Ireland being subject to EU restrictions.

There will be two lanes for goods sent from Great Britain to Northern Ireland. Goods destined for Northern Ireland would go through the green lane, meaning that they would no longer face onerous checks.

Goods destined for the Republic of Ireland would go through the red lane, meaning they would have to undergo checks before crossing the Irish Sea. The deal would also make it easier to transport pets and plants between the UK and Northern Ireland. 

A significant concession by the EU is a mechanism that gives the UK an effective veto over new EU laws affecting Northern Ireland. A group of 30 members of the Northern Ireland assembly will be able to submit a “petition of concern” over new regulations that it feels are not in the province’s interests. It would also need the support of the UK government and Brussels would need to be consulted.

The British Chambers of Commerce responded to the deal by saying: “Businesses in the UK will welcome the potential for stabilising relations with the EU.”

Nigel Green, CEO of De Vere, one of the world’s largest independent financial advisory, asset management organisations, said: “Since the 2016 Brexit referendum, and the intense political wranglings it has caused, business investment into the UK from global investors has faltered.

“The possibility of an all-out trade war between the UK and the EU, plus the multifaceted political fallout, has triggered major uncertainty – which investors avoided due to the risks involved. Companies are never going to heavily invest where there are high levels of uncertainty. 

“This deal will help unleash business investment that has been held back by global investors.

“We expect the pound will enjoy a bounce amid hopes for improved trading relations between the UK and the EU, which bolsters investor sentiment on Britain’s economic outlook.”

The pound leapt by 0.7% to $1.20 and was 0.3% up at €1.14. The FTSE 100 Index closed 56.45 points (0.72%) higher at 7,935.11.