Welcome to the first newsletter from Brexit FactBase, as published on 31st March. Timing was indeed everything. In Sir Keir Starmer’s speech on 1st April, he said that the UK wants stronger economic ties with the EU and that the next UK-EU summit will set out the direction. I hope you find the newsletter a good read.
The consequences of the US-Israel attack on Iran in February have focused minds around the world on the riskiness of US policy and the need for greater economic resilience to mitigate the risk. For the UK, this inevitably includes beefing up its relationship with the EU, its biggest trading partner.
In March, British politicians and their EU counterparts have started signalling that change may be on the way. There have been no policy announcements and key questions remain unanswered. So, in the run up to the second annual UK-EU summit, let’s look at the signalling and the three main options for a closer relationship.
Signalling
It’s no secret that the public has decided for some time that Brexit was a poor choice. Latest polls show 66% think Brexit was a mistake (YouGov, February 2026) and a majority, 64%, wants to rejoin the EU (YouGov, February 2026).
The government seems to be belatedly catching up with voters. On 17th March, Chancellor Rachel Reeves spoke of estimates of the economic harm of Brexit of up to 8% of GDP (which is double the OBR’s estimate of 4% and worth about £250 billion) and “a strategic imperative for deeper integration between the UK and EU – in our shared need for greater economic resilience”.
Labour’s limited reset is expected to deliver around 0.5% of GDP (see chart below). This will be welcome but is not enough to give the UK the economic uplift and resilience the country urgently needs.
On the same day, in Berlin, the French foreign minister, Jean-Noel Barrot, said, alongside the German Foreign Minister, that the UK would be welcomed back to the EU with “open arms”. The UK is the EU’s largest trade partner after the US and China.
On 18th March, Sir Sadiq Khan, Mayor of London, said in an interview with the Italian newspaper La Repubblica that it’s inevitable that the UK will rejoin the EU and that Labour should commit to do so at the next general election. He proposed a stepped return to the European bloc that would follow the reset of relations with Brussels with closer alignment, followed by rejoining the customs union and then the single market, both in this Parliament.
On 19th March, Sir Chris Bryant, Minister of Trade said at Chatham House that he believed the UK’s approach to trade with the EU was too piecemeal — tackling issues “one at a time, line by line, step by step” — and that the country’s trading posture needed to be treated as “a much bigger existential question” rather than a series of individual policies.
Customs union
Outside the EU customs union, the UK may be able to negotiate its own trade deals, but this only makes sense if they are substantially different or better than those of the EU. The UK had its first new post-Brexit agreements with New Zealand (2022) and India (2025), but the EU followed with its own deals. The UK leads on the Comprehensive and Progressive Trans-Pacific Partnership (CPTPP), but it’s only worth a tiny 0.1% of UK GDP. Meanwhile the EU announced on 23rd March that its major trade deal, which the UK does not have, with Mercosur (Argentina, Brazil, Peru and Uruguay) will begin on 1st May. It is also looking for a relationship with CPTPP.
The EU-Australia trade deal, announced on 24th March, neatly demonstrates that the EU is a more powerful trade negotiator than the UK. Australia’s FTA allows 17,000 tonnes of tariff-free access for beef to the huge EU market. In stark contrast, in 2021, Liz Truss as International Trade Secretary signed the UK-Australia FTA which allows Australia to export 35,000 tariff-free tonnes to the UK, with no limit after 15 years.
It’s true that the UK was able to act more quickly with the US than the EU and successfully negotiated lower tariffs. However, the US has proved to be unreliable and, following the recent Supreme Court decision, the UK now faces the same 15% tariffs as the EU.
If the UK entered into a customs union with the EU, the economic prize would be about 1.5% of GDP (according to government figures from 2018). It would be a step in the right direction, but a long way from 8%. This is because a customs union leaves most trade barriers in place, including: compliance with regulatory standards; product testing; controls for food, animals, plants; safety and security declarations; import declarations; customs and excise checks.
Single market
Single market membership would remove many of the other trade barriers. The single market works through harmonised rules and standards to make market access easier for both goods and services. It also provides deeper economic integration via the four freedoms—free movement of goods, services, capital, and people. Non-EU countries like Norway are in the single market but not the customs union. They pay for the privilege to be in the European Economic Area (EEA) and align their internal rules to EU law and regulation.
To reduce trade barriers further the UK would have to rejoin the EU. EU members benefit from the combination of the single market, the customs union, the VAT area and customs cooperation. However, even this is not friction-free. The EU is in the midst of strategic reforms to dismantle remaining internal trade barriers, complete and update the single market.
The third way
The third way, beyond the standard options of EU and EEA membership, is the EU’s new agreement with Switzerland. It gives partial integration with the single market for sectors where Switzerland commits to follow EU rules, and where both recognise each other’s standards and conformity assessments. The agreement also allows the Swiss to input to upcoming EU regulation (like the EEA arrangement for Norway). For smoother single-market access, Switzerland pays a contribution into the EU budget, which, just as it was for the UK as an EU member, is much less than the benefits gained.
Similar principles could be an ideal starting point for reshaping the UK’s relationship with the EU. On 20th March in Brussels, Maroš Šefčovič, the EU Trade Commissioner, reminded Nick Thomas-Symonds, UK Minister for EU relations, that a Swiss-style deal is on the table for the UK – if the UK wants it.
Towards the summit
A fortified UK-EU trade relationship would lead to a stronger UK economy and a stronger trading partner for the US. However, the UK will need to triangulate between the two relationships in thinking through the options. Though there will be some challenges, for example on US agri-food exports where the UK has said it does not want lower food standards, these should not be allowed to distract the government from its first priority: the national interest.
The need for action is becoming irresistible as geopolitical threats grow and economic headwinds intensify. As a result, the political stars are aligning to make the next annual UK-EU summit a critical event where the leaders could announce a step change in the relationship. The summit’s date has not yet been set but is expected to be in the summer. To seize the opportunity, the ball is squarely in the UK’s court to decide what it wants the new relationship to be.
For more detail on the topics in this newsletter, please go to Brexit FactBase sub-sections:
- Brexit vote – right or wrong?
- Attitudes to rejoining the EU
- TCA review and UK-EU reset
- UK contribution vs EU member benefits
- UK-EU trade options
Labour UK-EU reset and trade deals in context
