18 July 2024

CER's Peet: Where might UK-EU relations be under a Labour government?

There is much to think through when considering the future of UK-EU relations under a Labour government led by Sir Keir Starmer. But it is essential to start by analysing how and why Brexit happened. Why is the UK the only country to have decided to join but then leave the European project? The responses to this question are crucial for any consideration of where relations might go after the election.

Brexiteers similarly insist that Britain is not really European but rather global, by both instinct and history. Yet Conservative Prime Minister Edward Heath was surely right when he responded to President de Gaulle’s veto in 1963 by saying that “We are part of Europe by geography, tradition, history, culture and civilisation”.¹ Brendan Simms’s book ‘Britain’s Europe’ shows just as clearly that English and later British history has always revolved around Europe.² That was true not just in the medieval period, when French was the elite’s language and English monarchs spent far more time in France than at home, but even when Britain acquired the world’s biggest empire in the 18th and 19th centuries, since this was driven largely by European great-power rivalry. In this sense ‘Our Island Story’, a 1905 book much favoured by Brexiteers, is essentially as mythical as that great spoof ‘1066 and All That’ which was published 25 years later. Moreover, France, Portugal and Spain were global imperial powers long before Britain assumed the role.

Brexiteers also argue both that Britain’s trade is more global than that of other European countries, and that being linked to the EU has held the economy back as it has meant being shackled to a corpse with excessive Brussels red tape. Yet the historical evidence shows unequivocally that British economic growth was boosted, not reduced, by membership. On trade, the share of UK exports going to the EU has actually risen back above 50 per cent recently. Several EU countries such as Germany, France and Italy are also bigger exporters to China and even to India than the UK. And since 2016 British GDP per head in real terms has grown more slowly than that of all EU members bar Germany. Most reliable economic estimates reckon that Brexit has reduced GDP by around 4 per cent compared with what it would otherwise have been. Goods exports are down by 15 per cent, and business investment has stagnated at best. As an aside, it is worth looking hard at all Brexiteer claims to the contrary: they mostly ignore the fact that British growth was stronger than the rest of the EU’s before Brexit, they almost always focus on GDP and not GDP per head, and they tend not to adjust for inflation.

As for the supposed burden of EU regulation and red tape, this has always been hugely exaggerated. EU directives generally aim to standardise, not to increase the level of regulation within the single market. The laws that actually do the most to hold the British economy back are largely domestic ones, notably around planning, the minimum wage and other labour-market rules. Most businesses, even those in the City of London, prefer to stick to EU regulations, if only because they have to if they wish to trade into the single market. And it often turns out that it was successive British governments of both parties that gold-plated and thus increased the burden of EU directives when they were translated into domestic law.

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