Markets surge as UK-EU pact unlocks billions in trade and investment

Fidelity

Investors are eyeing the UK with renewed optimism as Prime Minister Keir Starmer’s landmark agreement with the European Union promises to reshape post-Brexit economic relations. The FTSE 100 is climbing, the pound is strengthening, and key sectors from retail to defence are poised for growth. This momentum signals a potential turning point for British equities and cross-border investment.

The UK-EU deal, unveiled at the London summit on 19 May 2025, introduces a comprehensive framework aimed at reducing trade friction and enhancing regulatory cooperation. Notably, the agreement eases border checks on food exports, reopens access to the EU’s energy market, and aligns carbon trading systems—measures projected to inject nearly £9 billion into the UK economy by 2040.

Financial markets responded positively. The FTSE 100 edged higher, buoyed by gains in consumer-facing stocks and exporters. The pound approached \$1.34, reflecting investor confidence in the UK’s economic trajectory.

Corporate developments further underscore this optimism. Greggs reported a sales boost, partly attributed to new viral products, though its stock remains under pressure. Vodafone, despite a €1.5 billion loss due to writedowns in Germany and Romania, announced plans for restructuring and growth.

The agreement also opens doors for UK defence firms to participate in the EU’s €150 billion SAFE defence fund, potentially revitalising the sector. Additionally, the deal facilitates smoother travel for UK citizens, with provisions for eGate access and simplified pet travel rules.

While the pact has been lauded by business groups, some sectors express caution. The National Farming Union warns against dynamic regulatory alignment, emphasising the importance of retaining sovereignty, particularly over new gene editing rules.

Fidelity Special Values PLC (LON:FSV) aims to seek out underappreciated companies primarily listed in the UK and is an actively managed contrarian Investment Trust that thrives on volatility and uncertainty.

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