‘The growth strategy no one will say out loud: rejoin the European Union’

Last week, a two-day seminar bringing together center-left participants from both Britain and the EU, including Labour MPs and party officials, MEPs, think tankers, academics and others, discussed where the “reset” in UK-EU relationships may lead to. The complexity, and the limits to what can be achieved without revisiting difficult issues, were plain for all to see.

Brexit forced unpalatable choices on Britain: either to distance itself from Europe, outside the single market and the customs union, free to make separate trade deals with the USA and others, but at great cost to the British economy, or, like Norway, Switzerland and others, to align with the European single market, attenuate the economic damage, but be obliged to follow single market rules without a full say on them when they change in the future.

Brexiteers themselves were divided on this. At the time of the referendum, some promised that Britain would remain in the single market, while others argued for “Global Britain”. The Theresa May government was torn apart on this. Johnson plumped for a hard Brexit leaving the single market and the customs union.

This has cost Britain dearly. According to the OBR and several academic studies, GDP is between four and five percent smaller than it would have been without Brexit. That would have delivered about £40bn extra tax revenue every year – our current debate about tax and spend would be very different!

These costs arise mostly from not being in the single market and the customs union. Why are they so significant?

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The single market is a set of common rules on product standards, consumer protection, environmental norms, workers’ rights and fair competition. This means products made legally in one member state are legal in all of them as they are made to the same rules. They can be traded without further ado, with no need for further certification, safety tests, or border checks. Common legal remedies are available should there be any disputes. Britain is no longer part of this system as the Johnson government wanted to “actively diverge” to undercut the EU by having lower standards. That means that British goods entering the single market often require checks, certification tests, paperwork, and, for food products, health certificates.

The customs union eliminates all tariffs (border taxes) between its members, with a common external tariff for imports from third countries. That in turn means that the EU negotiates trade deals collectively – with the clout of being the world’s largest single market. It therefore often gets good trade deals. When Britain left and had to replace the deals it had, as part of the EU, by its own separate deals with countries across the world, it struggled to even get roll-overs of the same terms, let alone any better ones. It also had to make a trade agreement with the EU itself, which is by far its most important export market (and supply chain source). While it did secure a no-tariff agreement, British goods entering the EU are now subject to “rules of origin” checks which involves looking at their components and calculating the percentage of added value that is British. It’s not just EU rules, but WTO rules which require this (in both directions).

For exporters, the upshot of leaving both is reams of paperwork, extra costs and frequent delays at the border. Faced with this, many small businesses have ceased to export. Fresh products (agriculture and fish) are particularly vulnerable to delays making them worthless.

The Labour government is seeking to reduce barriers to trade by aligning with single market rules. But it is constrained by the exceedingly cautious words it put in its manifesto, ruling out joining the single market or the customs union.

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The May 2025 UK-EU summit nonetheless set out some interesting first steps. A “Common Understanding” document envisages Britain following EU Sanitary and Phytosanitary rules to allow agri-food trade to be “undertaken without the certificates or controls that are currently required”. It also envisages “participation of the UK in the EU’s internal electricity market”, also entailing alignment with EU rules “where relevant”.  In both cases, alignment would be “dynamic” – meaning Britain would follow future changes to those rules. There would also be a linkage of carbon markets including Emission Trading Schemes.

Already there is talk of doing this in other sectors: chemicals and pharmaceuticals have been mentioned as possibly next in line.

Does this amount to re-joining the single market by stealth?  Well, the single market is not actually a membership organisation. It is a set of EU rules that you can align with to various degrees: Norway and Iceland are almost fully aligned; Switzerland is not far behind.

The problem, of course, is that while the EU’s current rules are still largely those shaped with full British involvement when it was a member, whenever the EU revises its rules, Britain will largely be a rule-taker. It will be consulted, but as a non-member it will not have a vote in the EU Council or Parliament.

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The only way to remedy that is to rejoin the EU, reap economic (and other) benefits, and co-decide on the rules and policies of the EU, regaining sovereignty as those rules and policies affect us anyway. But that is also a challenge. It would need years of negotiation – though not as many as some suggest given that the UK is still in line with most EU rules. It would in theory mean committing to join the euro – but as there are now seven Member States who have not joined the euro (five of which show no intention of joining) there will be scope for negotiating a similar arrangement to what Britain had before: the right to join, but not an obligation.

The EU would be willing to have us back. After all, Brexit was not good for the EU either and if the one Member State to have ever left were to come back, it would be a powerful vindication of its benefits. The one thing the EU would fear would be to repeat the whole Brexit saga again ten years down the line.

The key therefore lies in Britain. To go down the rejoin route would require a high level of public support. Recent polling shows that (after taking away the don’t knows/don’t cares), over 64% now think Brexit was a mistake and 62% favour rejoining the EU. Interestingly, these figures have been rising slowly but steadily, despite no leading politician publicly making the case to rejoin. By the time the next election manifestoes are written, it might be an idea whose time has come.

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