12 September 2024

Bloomberg's Editors: Brexit Burned Both the UK and the EU, But This Relationship Can Be Saved

The election of a new UK government has brought a fresh focus on strengthening the country’s battered relationship with the European Union. There are frequent ministerial visits, an air of bonhomie, and plans for bilateral agreements and broader reform.

All this is welcome. Britain’s economy is smaller than it would have been if it had stayed in the EU; businesses face more friction and fewer opportunities. But while Prime Minister Keir Starmer has recognized the importance of improved relations with Britain’s largest trading partner, he will need a better plan for delivering it.

Starmer’s predecessor, Rishi Sunak, put the UK-EU relationship on friendlier footing, including resolving an impasse over trade arrangements for Northern Ireland. Although Starmer is right to want to build on that, his approach lacks the kind of ambition needed to put the UK economy on a path toward stronger growth.

His party has already ruled out the measures that would be truly game-changing — rejoining the EU’s single market or customs union. Although a review of the post-Brexit arrangement known as the Trade and Cooperation Agreement is expected in 2026, the EU regards this as a technical exercise and not an opportunity for revision.

This partly reflects the political realities of herding a large bloc of countries. Most measures expanding the existing trade relationship would require agreement among the EU’s 27 member governments before negotiations could even begin. That’s a tall order at any time, never mind when the bloc is dealing with a war on its border, fractious politics and a yawning competitiveness gap.

It also betrays a certain institutional defensiveness. For Brussels, the pain that Brexit has induced on the UK is perhaps its only redeeming value: Notably, euroskeptic parties around the continent have dropped any mention of exiting the EU.

Even so, there are several areas where, with a little political will and creative thinking, the two sides could make real progress.

Some wins are well within reach. Extending cooperation on energy transfers and trading is one of them. Linking the UK’s emissions-trading plans to the EU’s would ensure a level playing field and reduce costs for exporters. It would also give British firms access to a much bigger carbon market.

Easing access for EU youth to study and work in the UK, and simplifying onerous visa requirements, should likewise be feasible. Labour could even go further and rejoin the EU’s Erasmus student-exchange program, rectifying one of the great injustices that Brexit imposed on UK youth. Making it easier for business professionals, including touring musicians, to travel and work also makes sense....

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