The deal, known as a trade continuity agreement, will guarantee future trading terms between the two countries once the UK has left the EU.
It was signed, in the Swiss city of Bern, by International Trade Secretary Liam Fox and the Swiss federal councillor Guy Parmelin.
The agreement is designed to remove the threat of additional tariffs in trade between the two countries and to also to lift the possibility of additional duties on “the vast majority of goods”.
The government says that “trading on these preferential terms”, as opposed to sticking to the terms of the World Trade Organisation, “will deliver significant savings and help to safeguard British jobs”.
It is claimed that the deal will, for instance, avoid around £8m of tariffs being added to the price of cars exported from the UK to Switzerland, while British consumers will benefit from lowers prices on Swiss goods, “such as clocks, watches and pharmaceutical products”.
The trade between the two countries is reckoned to be worth more than £32bn per year, making this the biggest agreement signed since the UK voted to leave the European Union.
Previous deals have been signed with Chile, Israel and the Faroe Islands, but critics have claimed that too little progress has been made in securing agreements with vital trading partners.
Britain has long traded around the world under the terms of deals agreed by the European Union, a procedure that will come to an end after Brexit.
Dr Fox has been leading the process of either “rolling over” these deals – by mirroring their terms in new agreements bespoke to the UK – or negotiating fresh deals.
The EU has 40 agreements, covering trade with 71 different countries, that would need to be rolled over. In the event of a no-deal Brexit, these would need to be completed by 29 March, an ambition that many in British business now believe to be almost impossible.
Dr Fox says he has had assurances of support from dozens of countries around the world, but has so far only signed a handful of agreements. In particular, there are few signs of progress in negotiating deals with big trading partners such as Japan, South Korea and Canada.
The UK cannot negotiate new free trade agreements, with countries such as the United States of America, while we are still an EU member.
Dr Fox arrived in Zurich last night on a flight from Dubai. He had been attending an international trade conference in the United Arab Emirates, where he encouraged British businesses to “look beyond Europe”.
He has faced growing criticism for failing to sign more deals, and for appearing to criss-cross the globe to little effect. Last month, Dr Fox was accused of having “extremely low credibility” by the chief executive of Unipart, John Neill.