Labour hopes to deepen economic ties with Europe outside EU’s structures

Before a whistlestop European tour to Berlin and Paris, Keir Starmer promised to mend “the broken relationships left behind by the previous government” and drive forward UK economic growth.

Changing the tone with European leaders is the easy bit. Changing the substance – especially finding new arrangements to boost growth – is a much taller order.

Starmer, who reiterated in Berlin on Wednesday that growth was “the number one mission of my government”, is not the first prime minister to find economic ambitions crimped by self-imposed red lines on Europe. Labour has ruled out rejoining the EU’s single market and customs union, the steps that would have the biggest impact in improving trade with the EU.

Instead, the Labour manifesto promised to tear down “unnecessary barriers to trade” by negotiating a veterinary agreement with the EU, improving access for touring artists to the continent and striking mutual recognition agreements for professionals. Such policies amount to little more than “tinkering around the edges of the relationship” and would do little to “address the continuing economic impacts of Brexit”, concluded a recent report from the thinktank UK in a Changing Europe (UKice).

Meanwhile, the Office for Budget Responsibility, backed by independent economists, has said its forecast for a 15% reduction in trade as a result of Brexit was “broadly on track”. Academics at UKice expect that the veterinary agreement could boost UK agri-food exports by 22.5%, a lifeline for some small businesses but not decisive for the overall economy.

Labour hopes it can deepen the economic relationship without joining the EU’s structures. The chancellor, Rachel Reeves, for instance, has suggested a “bespoke” arrangement for the chemicals industry to avoid £2bn of extra costs mostly associated with duplicating EU requirements.

Talk of bespoke deals raises the ghosts that haunted the Brexit negotiations, namely the UK taking the benefits of the single market free from the EU’s common rules, enforcement or budget payments. “People will soon rediscover there is a reason why there were red lines,” a senior EU official told the Guardian. “What we don’t want is to have the single market cut in pieces. The UK – they are very good negotiators and they always want to cherrypick.”

That said, officials are not expecting the enormous mismatch of expectations that bedevilled the early years of Brexit negotiations under Theresa May. Starmer, a regular visitor to Brussels when he was Jeremy Corbyn’s shadow Brexit secretary, is well known in the EU capital. He and his team “are well advised”, the senior official said. “They know what is feasible, what is not feasible.”

One EU diplomat from a large member state expressed concern that the UK government was not being straightforward with British voters about EU demands. “They have to be honest with their public. We are not a shelf you can pick things off,” they said.

The EU has been disappointed by Labour’s dismissive response to a proposed youth mobility scheme that would allow people aged 18-30 to work, live, study or travel for up to four years. Nils Schmid, the foreign affairs spokesperson for Olaf Scholz’s SPD party in the Bundestag, told BBC Radio 4’s Today programme that a youth mobility scheme was “a major feature of our wishlist”, but “not about immigration in a general sense”.

Yet when answering a parliamentary question about the scheme in July, Starmer framed it in general terms: “We are not returning to freedom of movement.” In Berlin, however, he struck a more nuanced approach that seemed to leave the door open to some kind of youth mobility programme.

The earlier outright rejection dismayed the EU, especially its repeated conflation of a time-limited youth mobility scheme with free movement of people, a lifelong right for EU citizens. The EU diplomat expressed disappointment over Labour “dismissing it right out of hand because it looks like free movement [when] it is not free movement at all”. The person added: “I am personally surprised they think it’s toxic when [the UK has] the same arrangement with others,” referring to a UK-Australia agreement.

Starmer’s government will face other EU demands. France, Belgium, the Netherlands, Denmark and other coastal states want to ensure post-Brexit fishing rights are extended beyond June 2026 when current arrangements lapse.

Meanwhile, the European Commission insists that the UK must fully implement existing agreements before negotiating new ones, amid concern over the rights of the estimated 3.5 million EU citizens living in the UK. Late last month the commission announced it was moving forward with a legal case begun in 2020 that alleges that the UK government has failed to protect EU citizens in the UK. “We have two big agreements with the UK and we want them to be implemented,” said a second EU diplomat, referring to the Brexit withdrawal agreement and subsequent trade and cooperation agreement.

With Starmer expected to meet the commission president, Ursula von der Leyen, soon and a UK-EU summit pencilled in for spring 2025, the government has more to do to repair the broken relationships of the past.