04 July 2024

EURACTIV's Moller-Nielsen: Labour victory unlikely to restore pre-Brexit economic ties, experts say

A Labour victory in the UK general election on Thursday (4 July) could foster greater levels of trust and closer economic ties with the EU – but is unlikely to restore pre-Brexit integration, as policy divergence looks set to remain a longer-term reality, experts say.

Sir Keir Starmer’s party, poised to record a historic landslide victory, has repeatedly called for a “reset” in UK-EU relationships – severely damaged by the shock Brexit vote in 2016 and subsequent withdrawal negotiations.

The party’s manifesto pledges to “improve the UK’s trade and investment relationship with the EU by tearing down unnecessary barriers to trade”.

Much like the Conservative party, however, Labour has categorically ruled out the UK’s re-entry into the single market or customs union and any deal that would allow citizens to move freely within the EU.

“The really big things are off the table,” Jim Brunsden, head of the macropolitical team at FleishmanHillard Brussels, told Euractiv. “That gets you down to the next tier of what you can do, which is still meaningful. But it’s not like there are any obvious low-hanging fruits.”

Brunsden explained that past efforts to reach an agreement on animal health and food safety, for instance, have floundered due to the EU’s insistence on a “Swiss-style” agreement, whereby regulatory standards are closely aligned, while the UK prefers a lighter deal modelled on the bloc’s trade agreement with New Zealand.

“One of the continual problems with Brexit has been the UK having a conversation with itself without thinking enough about what the EU might be prepared to accept,” he said.

Nevertheless, Brunsden noted that Labour’s more positive attitude towards the EU could foster greater trust between London and Brussels, which might help resolve more technical trade-related disputes.

“There are going to be situations where potential trade disputes arise – and trust between the two sides is going to matter,” he said.

Philipp Lausberg, an analyst at the European Policy Centre, added that the UK’s weak economic performance post-Brexit could also induce Starmer to seek closer economic ties with Europe over the coming years.

“There will be a more cooperative spirit [if Starmer is elected],” he told Euractiv.

“I think the real steps will not follow immediately, but… since Brexit is really an obstacle that prevents the UK from growing significantly, I could imagine that in a few years, there will be a significant rapprochement in economic terms.”

In the meantime, trade relations between the UK and the EU post-Brexit remain close but are markedly asymmetric.

In a report published last month, UK in a Changing Europe, a London-based think tank, found that the UK accounted for just 10.1% of the EU’s total trade in goods in 2023. Conversely, the EU was responsible for 51.8% of the UK’s total trade—the highest proportion since 2008.

The report also noted that Brexit has created “unavoidable economic realities” that significantly constrain the relationship – including, most notably, the UK’s non-membership of the single market and customs union, which, according to some estimates, has permanently depressed the UK’s GDP by 5%...

 more at EURACTIV

© EURACTIV