Sir Keir Starmer has come in for a great deal of criticism from both sides of the Brexit divide since telling the Financial Times last week that he would seek a major rewrite of Boris Johnson’s Brexit deal to revive Britain’s lacklustre growth. Some pro-Europeans are angry with Starmer for ruling out a return to the EU’s single market and customs union, which they say is the only way to reverse the damage of Brexit and to pave the way for rejoining. Brexiteers cry betrayal, seizing on footage of Starmer saying that he did not want Britain to diverge from European environmental and labour standards as evidence of a plot to reverse Brexit by stealth.
These criticisms are unfair. There is no plan or plot to take Britain back into the single market or customs union because there is no mechanism to achieve this short of another hugely complex negotiation for which there is no appetite on either side of the Channel. Brussels has enough on its plate grappling with how to enlarge the EU to include Ukraine and the western Balkans. A Franco-German discussion document published last week floated the idea of some form of “associate membership” limited to single market participation that could be extended to Britain. But there is no such status available today, and in any case, the authors were clear that even this would require full compliance with single market rules overseen by the European Court of Justice. No British government could agree to that.
Johnson’s Good Deal
The more pertinent charge against Starmer is that he may be promising more than he can deliver. Any realistic assessment of what improvement in the trading relationship is possible must start with acknowledging that Boris Johnson’s deal was not in fact a bad deal. It was about as good a deal as Britain could have expected given the constraints it had placed upon itself. Once it became clear that Brexit required exiting the single market and customs union, as it had to do, a deep rupture was inevitable. The Trade and Cooperation Agreement (TCA) is the most comprehensive free trade deal that the EU has ever concluded. The EU is certainly happy with it. Stefaan de Rynck, an aide to EU chief negotiator Michel Barnier, noted in his book, “Inside the Deal”, that Brussels achieved almost all of its objectives in the TCA.
Labour’s hopes of an improved trading relationship hinge on persuading Brussels to reopen the deal ahead of a review of the TCA due to take place in 2026. The changes it says it is seeking are all sensible and would be welcomed by British businesses. These include a new agreement on plant and animal health standards, a "mobility deal" that would give British professionals improved rights to work in the EU including mutual recognition of professional qualifications, and a deal to allow British inspectors to confirm declare that British goods conform to EU trading standards.
Yet as the UK in a Changing Europe notes in a new report, Brussels regards the 2026 review as merely a technical check on how the TCA is being implemented, not a renegotiation that would in any case require a new mandate from all 27 members. Nor are Labour's objectives straightforward. A veterinary agreement would require British alignment with EU law, as would a deal on conformity assessment. The EU would have its own demands in return for a mobility deal including greater rights for its own young people to work and study in Britain. Similar agreements with third countries have run to hundreds of pages and taken years to negotiate.
Looming Cliff Edges
In fact, Labour’s real challenge will be to stop the trading relationship getting worse. That is because the TCA contains a number of looming cliff edges as current grace periods expire. From next year tariffs will start to apply on all trade in electric vehicles unless they contain at least 45 percent British and EU content. So far Brussels has resisted pleas from London and the industry for a postponement. Similarly the current deals on fisheries and energy expire in 2026. Equivalence agreements regarding financial services and data adequacy will need to be maintained or British business will suffer. The introduction of an EU carbon border adjustment tax could see UK exports put at a further disadvantage if Britain stays outside.
Labour will also need to navigate domestic cliff-edges. The Tories have continually delayed the introduction of full border controls on EU imports. That may have been sensible to avoid adding to costs and delays for importers at a time of high inflation. But the longer this unbalanced situation persists, the greater the disadvantage for exporters, who must compete with EU firms currently spared border checks.
Meanwhile the biggest threat to Labour's hopes of an improved relationship is likely to come from what is sure to be persistent pressure to diverge from EU standards. Starmer has already been forced to rule out dynamic alignment, whereby Britain would update its rules in line with the EU, effectively guaranteeing that standards will diverge over time. When the government recently bowed to pressure from housebuilders and agreed to repeal EU environmental rules, Labour didn’t argue for the status quo but claimed to have their own preferred reform. Nor have Labour opposed government plans to diverge from EU financial services rules.
The truth is that while business may say that it wants to maintain close alignment with the EU, as Brexit costs mount and with no prospect of a return to the single market, lobbying for deregulation in the hope of securing a competitive boost is bound to increase. At the same time, a Conservative party freed from the responsibility of office, and egged on by the Brexit press, can be relied upon to present any attempt to maintain alignment as a sell-out. And as divergence grows, so too will frictions with the EU as it seeks to maintain a level playing field.
Of course Labour is right to want a closer relationship with the EU, as indeed Rishi Sunak has been seeking. But as Brexiteers used to be fond of telling us, Brexit is a process not an event. That process has far from played out. The damage already caused by Brexit has been considerable in the form of business models upended, increased costs and bureaucracy, labour shortages and the return of stagflation. It will take a lot more than goodwill and benign intentions to reverse the spiral. Starmer will have to invest considerable political capital for what may be limited gain.
Thank you for this piece, which spells out the problem starkly. Before I book my one-way ticket to Zurich it would be helpful to know if there are any good ideas for digging ourselves out of the hole that we're in
You have set a high bar for yourself Simon. Fascinating as always.