Analysts suggest that the new Brexit agreement between the U.K. & the EU could help to bring Britain’s “healthy foundations” back to the forefront, provided relations with Brussels improve.

Monday’s announcement by Rishi Sunak, Prime Minister of the United Kingdom, and Ursula von der Leyen, President of the European Commission, was the signing of the Windsor Framework. This framework aims to fix the controversial Northern Ireland Protocol.

The Protocol was a persistent problem for unionist pro Brexit parties in Northern Ireland. It had caused the Northern Ireland Assembly to be at a standstill over a year after the resignation of the Democratic Unionist Party.

Although the agreement was expected to pass the British parliament, it has been met with mixed messages by Belfast. The DUP is currently reviewing the details of the agreement against the “seven test” it insists upon.

Tony Travers, professor at London School of Economics and Political Science told CNBC Monday that, while Sunak could still be challenged by the DUP, the prime minister’s approach to Brussels is more friendly and provides a platform for the U.K. and EU to have a more rational relationship.

Kallum Pickering, Berenberg Senior Economist, stated Monday in a note that the breakthrough could be a “line of sight” after six and a half years of uncertainty.

The threat of a tit for tat trade war between Britain and its largest market is now eliminated. This threat had been a constant threat under Sunak’s more combative approach to Sunak’s predecessors Liz Truss and Boris Johnson.

Pickering stated that this would increase confidence and potentially unlock business investment previously held back by the U.K-EU trade dispute.

He explained that while the U.K.’s decision to raise trade barriers with the EU will have a lasting effect on its growth potential, the main factor that has held the U.K. back since the referendum was uncertainty.

“If this happens, we expect the U.K. to reassert its healthy fundamentals, well capitalised banks and cash flush households and businesses, and well-regulated market to do so.”

Berenberg maintains the above-consensus GDP projections of the U.K. for the next three years. He sees a 0.8% contraction in 2023 followed by a 1.6% rebound 2024, and further growth to 1.7% in 2025.

In December, the U.K. GDP fell by 0.5%. The economy had been flatlining in the last quarter of 2022 to narrowly avoid technical recession. However, the high cost of living, tightening monetary policy and persistent headwinds to growth have impeded growth. According to the Bank of England, the economy will enter a five-quarter recession in its first quarter of 2023.

A similar deal for Brexit would have had a significant impact on the markets several years ago. Although Sterling gained slightly after the announcement, the overall reaction to the announcement in stock and currency markets was fairly muted by historical standards.

Nomura’s senior G10 FX strategist Jordan Rochester stated that, despite its political importance, the deal wouldn’t immediately affect the market’s pricing for the U.K.’s overall trading relationship to the EU and that traders have other priorities.

He said that this was a Northern Ireland issue. Northern Ireland, which has one of the lowest populations of all the U.K. regions and the smallest GDP, won’t materially alter many people’s macroeconomic forecasts about where growth will be in the U.K., what inflation will be, or what it means for the Bank of England.

He suggested that the agreement could have a greater market impact if there is a shift towards “more pragmatic politics” within the EU. This could lead to incremental improvements in trading arrangements.