Richard Barfield / Apr 2026
Image: Shutterstock
The consequences of the US-Israel attack on Iran which began in February have focused minds around the world on the riskiness of US policy and the need for greater economic resilience to mitigate the risks.
Making the UK’s economy more resilient inevitably includes beefing up its relationship with the EU, its biggest trading partner. On 1 April, Sir Keir Starmer said emphatically that he wants a more ambitious economic relationship with the EU. While the red lines are still in place for now, they seem to be weakening.
During March, British politicians and their EU counterparts had already started signalling that change may be on the way. Sir Keir said the UK-EU summit would be the forum where announcements will be made. The summit’s date has not yet been set, but is expected to be in the summer.
In the run up to the summit, let’s look at the signalling and the three main options for a closer relationship.
Signalling
It’s no secret that the British public has decided 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 acknowledged estimates of the economic harm of Brexit of up to 8% of GDP (double the OBR estimate) 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 . This falls a long way short of the economic uplift and resilience the country urgently needs.
On the same day, in Berlin, the French foreign minister, Jean-Noel Barrot, said, "So let us say to our British friends that if they stand ready to come back to the single market, with all associated privileges and duties, they will be met with open arms." The UK is the EU’s largest trade partner after the US and China.
The day after, on 18th March, Sir Sadiq Khan, Mayor of London, said 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 following the reset of relations 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 that he believed the UK’s approach to 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”.
Customs union
Outside the EU customs union, the UK can negotiate its own trade deals, but this only makes sense if they are substantially different or better than those of the EU. The evidence is that they are not.
For example, the EU announced on 23rd March its major trade deal, with Mercosur (Argentina, Brazil, Peru and Uruguay), which the UK does not have.
The EU-Australia trade deal, announced on 24th March, also 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 EU. In stark contrast, the UK allows Australia to export 35,000 tariff-free tonnes to the UK, with no limit after 15 years.
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 long way from 8% because a customs union leaves most trade barriers in place, such as customs checks and product testing against EU standards.
Single market
Single market membership would remove many of the other trade barriers through its harmonised rules and standards for both goods and services. Non-EU countries like Norway are in the single market but not the customs union. They pay for the privilege and align their internal rules to EU law and regulation and adopt freedom of movement.
To reduce trade barriers any further, the UK would have to rejoin the EU. This would also give the UK a voice in setting the direction for the EU and make cooperation on defence more effective.
The third way
The third way 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. Switzerland pays a contribution into the EU budget, which 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 will announce a step change in the relationship. The opportunity is there to further the national interest, with the ball squarely in the UK’s court to decide how ambitious it wants the new relationship to be.
