The deal covers trade in goods but not yet services, including financial services.

Huw Evans, director general of the Association of British Insurers, said the deal was a positive step but much remained to be done.

He said: “While this agreement doesn’t directly cover the insurance and wider financial services industry, it provides a good foundation for positive future cooperation with our European neighbours. We hope that this will also allow for outstanding issues to be resolved quickly.”

Chris Cummings, CEO of the Investment Association, said: “The announcement that a deal has been reached is good news for the millions of British and European savers and investors who rely on the investment management industry and is a welcome first step in defining the future relationship between the UK and the EU.

“The investment management industry has a central role in helping to turn the savings of millions of people into investments that companies now urgently need. The best way to unleash this potential is for the EU to recognise the UK's regulatory regime as being equivalent to its own and minimise any further disruption in the market."

Edward Park, chief investment officer at wealth manager Brooks Macdonald, said: “Whilst the agreement reached is described as a ‘thin’ deal, it is considerably more palatable to the market than a disorderly exit. This thin deal can also be a launchpad for further integration over time when UK/EU relations are less of a political hot potato.”

He said he expected news of the deal to boost UK GDP in 2021. He cited an OBR forecast that a “real” deal would boost UK GDP in 2021 by 5.5% compared to a no-deal resulting in only a 3.5% rise.

He added: “Services are a problem for 2021 but this is where the EU imports more from the UK than the other way round, so this could be a particularly difficult area. The Brexit saga will continue well into 2021.”

Bob Wigley, executive chair of banking and lender trade body UK Finance, said the deal brought “much-needed certainty for businesses.”

He added: “Looking ahead, it will be important to build on the foundations of this trade deal by strengthening arrangements for future trade in financial services. This can be achieved by building on the longstanding regulatory dialogue and supervisory cooperation between UK and EU authorities and reaching agreements on all appropriate equivalence determinations as soon as possible.”

Hinesh Patel, portfolio manager at Quilter Investors, said the deal was “a welcome Christmas surprise after four and a half years of endless back and forth.”

But she added: “The devil will of course be in the detail so it is too early to declare winners or losers just yet, but the real benefit of this news is the end to four years of ‘suspended animation’ and an opportunity to move beyond the bluster we have been hearing since the referendum campaign began.”

She said she expected the deal to help “unblock” the backlog of international investment that has been waiting for some sort of outcome before institutions begin investing in UK plc once again.

She added, however, that the response to Covid-19 was far more important.

Nigel Green, CEO of deVere Group, an international wealth management group, said: “Stock markets will be buoyed by the trade deal and the pound – consistently the most reliable Brexit sentiment bellwether – will be strengthened as a result. But let’s be very clear: this is not the end of Brexit.”  

Richard Buxton, head of strategy, UK Alpha, Jupiter Asset Management, said it was a relief that the potential damage to both sides from a ‘no deal’ had been averted.

He called the deal: “Skinny, lightweight, the bare minimum required but a deal nevertheless.”

James Athey, investment director, Aberdeen Standard Investments, said the deal was “pretty skinny” but should minimise disruption at the borders.

He added: “It remains to be seen if that Christmas cheer gives way to a New Year hangover when analysts start pouring over the details.”