Re-doing Brexit?
This post is by Amy Tinley, Bradshaw Advisory’s Managing Director and a former Special Adviser in the Department for International Trade.
If hardworking UK businesses were looking for a new and better trading relationship with the EU, the last leaders' debate of the general election campaign gave little hope for improvement.
Julie - the owner of a jazz vinyl record business - asked ‘how can we mend our broken trading relationship with Europe?’ claiming to have lost 90% of their trade since Brexit.
Sunak launched into a monologue on cutting taxes for small business and repeating that a better deal with Europe on trade would mean more immigration, whilst Starmer offered that Labour would like ‘a trading deal’, ‘a deal on research development’, and ‘a deal on security and defence’.
Neither were anywhere near answering her question. Sunak resorted to talking about tax cuts for small businesses, because, in reality, this is the only option open to any government to help make up for their financial loss, at least in the short term. And as for Starmer, last time I looked we do, actually, have ‘a trading deal’ with the EU - the UK/EU Trade and Cooperation Agreement (TCA) which is up for review in May 2026 (or as early as 2025 should both parties choose).
In fact, under this existing agreement tariffs on selling vinyl records into the EU are a hefty 0%.
So, what is going on? And how can either side's trade policy actually help?
Whilst all things trade were front and centre of recent election campaigns, they have been noticeably absent from this one. No one, least of all Starmer, is keen to open up the deep wounds of Brexit - a politically toxic topic that should rightly, be banished to the past. Yet, a new Labour government will quickly find this topic is very much a part of their immediate political future.
Not only have they promised a new trade strategy, new targeted trade agreements and standalone sector deals, but ‘an improved and ambitious relationship with our European partners’ too. Before Keir has even got his feet under the table in No10, Boris’s ‘botched’ deal (in Starmer’s words) will be up for review. This is not unusual in trade agreements and the vast majority contain a review clause at around the five year mark.
The opportunity for Labour to get an ambitious new deal with Europe to help businesses like Julie’s will be Starmer’s for the taking. Or will it?
Two major things - not in the TCA - which Labour are seeking to develop are an external security and defence cooperation and an sanitary and phytosanitary (SPS) agreement. SPS covers things like rules on live animal, ‘high risk plants and animal by-products’. Other measurers like equivalence provisions for financial services and the adequacy of the UK data protection regime are also on the cards. However, none of this list will help Julie.
Last night the Labour leader, and the UK’s PM in less than a week's time, reiterated his red lines on this renegotiation - no going back into the EU, no membership of the single market, no return to the customs union, and no free movement of people.
An SPS agreement, arguably Labour’s flagship trade policy, would of course aim to remove border checks on food and agricultural products. But, given the red lines above, would surely come with the UK having to accept ‘dynamic regulatory alignment’ (taking EU rules automatically) and with it, oversight, to a degree, of the European Court of Justice.
Starmer has said that the UK doesn’t want to be a rule-taker, but we’ll have to see how this stands up to scrutiny and calls from the likely Labour supermajority - most of whom would likely be happy to accept these terms.
Accepting these terms, would of course, also have a negative effect on any (green trade) deal Labour may look to do with the US.
Labour will also be launching itself headlong into a fight with the UK’s ports. Ports that have invested hundreds of millions in new infrastructure, and the rest, to support new checks on SPS-related products. Perhaps that's why they’ve also pledged £1.8bn to help the ports sector and soften the blow for wasted investment and further rule changes.
And the bigger rub. It is unlikely that any of these deals will be done quickly either. It is even more unlikely that a review of the EU-UK trade agreement will be a top priority for the EU who also feel bruised from the Brexit saga.
They will see the upcoming review as more of a tidying and smoothing of the edges of the existing agreement rather than a wholesale renegotiation. How the EU approaches this review could rob the new Labour government of its aspirations and instead return more of light tinkering. Indeed, EU Vice-President of the European Commission Maroš Šefčovič said the review “does not constitute a commitment to reopen the TCA”.
What’s more, Labour has also pledged to make the trade policy-making process more transparent with involvement from the trade unions, devolved administrations and businesses. Whilst their views may be more united than they were with the Conservative’s views on Brexit (not that there was a collective view), red lines come thick and fast from vested interests and quickly start to become impenetrable. This is what Sunak was getting at in the debate last night - you can have grand ambitions and as many red lines as you want but negotiations are often brutal at the coal face. Leaks and briefings from the parties mentioned above are likely to hamper the process even further.
Of course, what both leaders should have said in answer to Julie’s question - and that Labour have pledged to do in their manifesto - is to remove barriers to exporting for small businesses and help educate them on how to understand the system.
But these measures, whilst helpful, are the less headline-grabbing daily grind of the trade world, painstakingly negotiating the removal of the important ‘non-tariff barriers’ - the paperwork, labelling requirements, border checks and delays, as well as often laborious customs declarations and improving trade facilitation. The leaders don’t want to talk about these issues as they are notoriously mundane and complex. Starmer does, perhaps, have the opportunity to negotiate on some of these areas that are of strategic mutual interest but what will the EU want in return?
Will all this be music to Julie’s ears, though? I think not.
Do the public care either? The truth is that YouGov polling shows that apart from a small core of hard-core Remainers the public have moved on. And so have our EU trading partners. Yet, how the new Labour government negotiates this trade review, could be an unexpectedly important moment in Starmer’s premiership.
