Is the UK-EU reset worth pursuing?

Labour has taken a defensive position on Brexit since Keir Starmer first set out his red lines at the Centre for European Reform’s 24th birthday party in 2022. He said there would be no return to the single market or customs union and no freedom of movement under his premiership. Those promises were intended to reassure Leave voters, many of whom had deserted the party in the 2019 election. But Starmer vowed in the Labour manifesto to “tear down unnecessary barriers to trade” with the EU and “make Brexit work”. Are all these promises compatible?

The answer is ‘not really, but do it anyway’. Two weeks ago, I published some back-of-the-envelope calculations of the benefits of the reset, based on the negotiating demands that the UK and the EU have set out. I found that together they would raise Britain’s GDP by about 0.3 to 0.7 per cent in the long run. Of course, that is far smaller than the hit from Brexit, but the reset is certainly worth pursuing.

For a start, the potential benefits are larger than most trade agreements. According to analysis by the British government, a free trade agreement with the US would raise Britain’s GDP by 0.07 to 0.16 per cent, and the Australian and New Zealand FTAs will raise it by 0.08 and 0.03 per cent respectively. That is because the EU remains by far the UK’s largest trade partner by dint of its size and proximity.

Voters are supportive. According to polling by the European Council on Foreign Relations, 55 per cent of Britons think that the UK-EU relationship should become closer, and pluralities in Germany, Poland, Spain, Italy and France agree. Despite resistance from the Home Office and Labour’s political strategists to the EU’s demand for a youth mobility scheme, a large majority of Brits think it is a good idea. According to my calculations, that is the part of the reset that might raise GDP most substantially, because it could lead to around an extra 300,000 young EU citizens working in Britain in the long run.

There is little point worrying about the reaction of the pro-Brexit right. Even Starmer’s limited asks have been portrayed by The Sun as a “betrayal of Brexit” and by Conservative leader Kemi Badenoch as “giving away our Brexit freedoms”. But any attempt to reduce the damage to Britain’s economy would entail alignment with EU rules and a role for the EU institutions in policing the agreement. If the reaction to small steps is hysterical, there is little additional political cost in making larger ones.

Finally, better relations with the EU matter for political as well as economic reasons. The impact of Trump UK-EU relations has been overdone – his presidency is unlikely to change the Brexit calculus on either side, because that is largely driven by European domestic politics. But geography matters: Putin’s invasion of Ukraine means that security co-operation is essential, and more energy trade is needed to ensure security of supply and to deal with the intermittency of renewables. A reset might help unlock more co-operation in other fields. Given Europe’s security problems, that can only be a good thing.

John Springford is an assoicate fellow at the Centre for European Reform.