Starmer seeks UK-EU ‘reset’ – is another Brexit row looming?
Ongoing talks between the UK and the EU will come to a head at a summit in London on Monday, as the government seeks a post-Brexit “reset” of relations.
The talks have come about as part of a routine five year review of the UK-EU trade and cooperation agreement, though they have taken on new significance as Labour seeks to strengthen trade and economic ties with the bloc.
Details of a possible Youth Mobility Scheme and an agreement on emissions trading are likely to be key areas for discussion, alongside an agreed framework between the EU and UK to continue negotiations.
Westminster scrap
Conservative MPs, who have been extolling the benefits of Brexit following the key bilateral trade deals the UK struck with India and the US last week, are concerned the “reset” will walk back on key Brexit terms.
Conservative leader Kemi Badenoch has promised to “reverse” any agreement with the EU if it involves “trad[ing] away our sovereignty behind closed doors.”
Badenoch is worried about the return of free movement, the “loss of UK fishing rights” and that “NATO stays the cornerstone of European defence.”
Badenoch was in Brussels on Thursday, alongside shadow trade secretary Andrew Griffith, though Griffith said this is a “coincidence” as they were both speaking at an international conference with their “sister parties.”
Meanwhile, Lib Dem sources say they want talks to include movement on the customs union, the youth mobility scheme to go through, striking a “proper” UK-EU defense pact, an agreement on touring artists, and a veterinary agreement which cuts down on the red tape around food trade.
“Closer ties with the EU is right, but should go further and faster,” a senior party source told CityAM.
Fishing for a good deal
The EU’s demands include the rights to further fishing in British waters, a point which is understood to have thrown talks “into turmoil.”
This is because terms around fishing and food are tied. If the UK does not agree to grant access to its waters to EU fishing vessels, the EU will impose a time limit on a deal to cut red tape for UK food and agricultural exports, aligning them with EU standards (known as a ‘veterinary agreement’), according to the Financial Times.
In order for the deal to yield substantial cost reductions to the UK food industry, it would need to be sustained for a longer period. In 2022, UK fisheries produced £1.04bn worth of seafood.
Steve Baker, a former minister for Exiting the European Union under Theresa May, told CityAM that if Keir Starmer decides to be “lazy” and align with the EU on food standards, that would be “entirely inconsistent with our exit from the European Union.”
For Baker, the ideal outcome would be agreeing to a deal akin to the one the EU has with New Zealand, and not “subordinating the UK’s legal system, even in part, to the European Union’s.”
Griffith told CityAM that “everyone wants to see frictions on businesses removed or reduced, but a lot of what they’re talking about [in EU-UK negotiations] is not that, and what we don’t want to do is reduce our freedom to form independent trade agreements, just at the moment that that agility has real value.”
The Office for Budget Responsibility claims the current post-Brexit relationship between the UK and EU could reduce long-term productivity in the UK by as much as 4 per cent, and both exports and imports will be reduced by 15 per cent, compared to a UK that remained in the union.
Alignment on energy and financial services
Post-Brexit, the City remains a vital financial centre for the EU and is still the biggest global hub for euro currency trading, with scores of European banks sustaining a major presence in the Square Mile.
For Baker, an agreement with the EU that enhances the trade of financial services is “certainly in the EU’s interests as well as our own.”
TheCityUK, a financial services lobby group, is hoping to see the joint EU-UK Financial Regulatory Forum further utilised, and for there to be more openness and fewer restrictions on this front, as there is a risk that inaction stands in the way of growth.
However, Shadow Chancellor, Mel Stride said: “Financial services are a vital part of our economy, yet Labour don’t seem to be pursuing any gains for the sector in their EU reset. They seem more interested in signing up to EU rules than in backing UK finance. We must not be rule takers and must remain outside the single market – but the government could be pursuing improved market access for UK firms through regulatory cooperation.”
Meanwhile a letter to the government penned by Dhara Vyas, chief executive of the trade body Energy UK, calls for further EU-UK alignment on energy.
Energy UK is hoping the UK comes out of talks with further standardisation across the EU and UK emissions trading schemes.
The industry body also hopes that after these talks, when the EU’s Carbon Border Adjustment Mechanism comes into operation in 2026, industries like steel, chemicals, and electricity do not face issues in trade.
Free movement by another name?
After the government’s immigration announcement on Monday saw Starmer promising to cut down on the influx of workers into the UK, the PM is now looking to open up the UK’s borders to the EU’s 18-30 year olds.
In discussion is a “youth mobility scheme” in which adults under 30 can freely work, study, and travel between the EU and UK. Though the proposed iteration of the scheme does not contain provisions for temporary migrants to remain in the long-term, as was the case with the post-Brexit EU-settlement scheme.
Baker is in favor of this scheme: “I don’t see that as a return to EU free movement, because it’s limited numbers, for a limited period.”
Baker also supports freeing up movement when it comes to touring bands, who might face difficulties crossing borders with their instruments.
Mark Hilton of the campaign group, BusinessLDN, also supports the arrangement, pointing out that “the UK currently has a youth mobility scheme visa which is open to people from 13 non-EU different countries, including Australia, New Zealand, South Korea, Iceland, Uruguay, Hong Kong and Andorra.”
Other professional services industries have their own wish list. As the EU is the UK’s largest export market for legal services, the Law Society of England and Wales see this as an opportunity for UK lawyers to receive education in the EU and remain competitive.
Getting a security deal over the line
Monday’s summit is expected to yield an announcement on a defence and security pact as the threat from Russia looms.
A spokesperson from Best for Britain, which campaigns for closer EU-UK ties, that “while a new defence pact could allow British firms to bid for contracts from the EU’s €150bn SAFE fund, more significant economic growth would be unlocked by closer alignment on goods and services, up to 2.2 per cent according to independent economic analysis.”
Polling by Best for Britain indicates that 69 per cent of people support a defence and security pact, especially in the face of Russian aggression and US isolationism.
A source from the Conservative party close to defence discussions said that from their experience, “it’ll go down to the wire throughout the night.”
This comes amid an announcement from the government to ramp up defence spending in what Starmer calls “the biggest sustained increase in defence spending since the end of the cold war.”
Whatever agreement emerges on Monday, it’s likely the political fight in Westminster is just getting started.