UK-EU relations under the Labour Government: too soon to call

One of the key questions facing the new Labour government in the UK is how precisely it will seek to reset Britain’s relations with the European Union after the turmoil of the Brexit years and the economic malaise afflicting our economy, of which exiting the EU has definitely been a factor. It is an issue in which all of us have a stake, not least businesses who are seeking to maximise their success across European markets in the period ahead.

On some issues, political leaders go through elections keeping their cards close to their chest and work out in office how to execute and gain public buy-in for what they were already minded to do. Many of Labour’s opponents suspect them of a pre-conceived plan to undo Brexit and will spend the coming months, probably years, accusing them of selling out the will of the people.

The idea Labour has a secret plan to fall back into the arms of the EU is the obvious charge to make. It may well resonate with vital voters in parts of the country who deserted Labour after the 2016 referendum but have tentatively returned at the election just gone, sick of a Conservative government that had lost its way.

But the reality is more nuanced. The public don’t know Labour’s plan for the EU because they don’t have one yet. Beyond a commitment to resetting the years of antipathy and mistrust built up by the last Conservative government and closer cooperation on security issues, they are undecided on the best way to proceed and I believe are open to a number of different paths. Powerful factors pull in opposite directions, making this a genuine dilemma for Prime Minister Sir Keir Starmer and his leadership team.

On the one hand, Labour’s top priority of returning the British economy to sustained growth suggests they should be looking at any lever that will help businesses succeed. Labour’s strategists know their position is far more fragile than its resounding parliamentary majority suggests. They know that if they have not shifted the economy by the time of the next election, voters will turn away from them in great number. So the progressive pro-Europeans who are natural allies of Keir (of whom there are many, indeed he himself was believed to be one during his days as Labour’s shadow Brexit secretary in the 2015 to 2019 parliament) would like him to be preparing to comprehensively renegotiate the Brexit trade deal with the EU that has replaced the ease of the single market with much greater barriers to the movement of goods and labour. To them, cooperation with their European neighbours in the national interest is an act of faith, part of their core belief. They experienced Brexit as a visceral, grievous blow. And more importantly than currents of belief within the Labour party, many businesses are understandably deeply frustrated by the added bureaucracy and delay of cross-border trade since Brexit and worried by the tightness of the British labour market since freedom of movement of EU workers was ended.

But two equally powerful factors point in the opposite direction. Firstly, those same strategists who know the new government is toast if it doesn’t restore the economy to growth also understand how deeply betrayed many of Labour’s voters will feel if the party reneges on its election pledge to keep the fundamentals of Brexit intact. And secondly, there is no obvious route of return in which Keir turns up in Brussels and wins instant agreement on all the issues he would like to change in the current trade arrangement. Any re-negotiation is likely to be protracted and tetchy, with key players on the EU side determined to extract a price from Britain for the years of Brexit disruption. Some wise heads will be counselling the prime minister not to embark on a course which exposes him to domestic grief without any guarantee of success.

Whichever side you fall on, this is a fascinating and important issue. It is one particularly close to my heart as a former Remain-supporting Labour MP representing an industrial town in England that voted strongly in favour of Brexit. Many voters in Barrow-in-Furness were pretty furious with me for briefly entertaining the idea of a second referendum (I eventually changed my mind on that, but that’s another story). But I am also fascinated from my background as an adviser to the last Labour government who was sent to Brussels to negotiate on EU-wide agreements like the agency workers directive when Tony Blair was prime minister. That experience did not quite turn me into a Brexiteer, but seeing the “sausage factory” up close did highlight the difficulty of reaching mutually beneficial agreements across 28 member states, many of whom have sharply contrasting economic and political priorities and somewhat different cultural attitudes to major workplace issues. If you were given a blank sheet of paper and told to design your ideal model of good government, you would not draw the European Union.

But nor would you draw up the current post-Brexit mish-mash, yet this is precisely what businesses in the UK and on mainland Europe are being forced to navigate and looking to the new government for help. Either to build something better or just make the current arrangements more manageable or comprehensible. There is considerable opportunity to unlock a better business environment alongside the obvious downside risk here.

In the crucial months ahead, I hope as many organisations as possible will play their part by setting out clearly and calmly the issues they face navigating across markets at present, understanding in as much detail as possible the macro and micro factors at play, and communicating what good could look like. It is great to be part of the Rud Pedersen Group that is uniquely positioned to help clients understand and navigate this vital terrain.

To find out more about the future of UK-EU relations, get in touch with our team in London at [email protected]