The United Kingdom and the European Union have agreed a narrow post-Brexit trade deal that will shape their economic relationship for years to come.

The announcement came on Thursday afternoon, four-and-a-half years after the British people voted to leave the EU in a referendum June 23 2016, and days before the post-Brexit transition period ends on Dec 31.

Speaking at a news conference at Downing Street, British Prime Minister Boris Johnson said: "We have completed the biggest trade deal yet, worth 660 billion pounds ($880 billion) a year, a comprehensive Canada-style free trade deal with the EU."

He went on to say that for the first time since 1973, the UK will be an independent coastal state with full control of its territorial waters.

"Although we have left the EU, this country will remain culturally, emotionally, historically, strategically, geologically attached to Europe - not least through the 4 million EU nationals who have requested to settle in the UK over the last four years, and who make an enormous contribution to our country and our lives," he added.

Meanwhile, in Brussels European Commission President Ursula von der Leyen hailed the deal as "fair and balanced".

"We have finally found an agreement after a long and winding road," she said. "It is a good deal that is fair and balanced and responsible for both sides."

Von der Leyen pointed out there are strong measures within the deal that can be taken if one party does not adhere to the rules.

"There will be a review after four years to ensure both sides are playing by the rules agreed in this deal, and to see that the level playing field is level," she added.

"There are strong safeguards to ensure there is an incentive for both sides to stick to what they have agreed to."

Details of the deal are yet to be disclosed and it need to be ratified by parliaments on both sides. In the UK, Members of Parliament are expected to be recalled to the House of Commons immediately after Christmas to ratify the agreement, which will come into force on Jan 1, securing tariff-free trade on most goods.