Labour denies plan for UK to rejoin EU customs union

Tensions within Labour over its policy towards the EU burst to the surface on Monday after the party was forced to deny a report that it planned to re-enter a customs union if it wins the general election.

The paper from the Eurasia Group political consultancy cited unnamed “senior Labour insiders” as saying the party would seek to revive a high-alignment deal, originally brokered by former prime minister Theresa May but rejected by parliament in 2019, in a bid to boost economic growth.

“[That] deal is a first-term ambition. A de facto customs union by another name. It is the first step of where we’d want to get to,” one of the insiders reportedly said, adding they were reflecting new internal thinking on the EU relationship within the Labour leadership. 

They added that if the opposition party won an October election with a large majority, as current opinion polls suggest, then Labour leader Sir Keir Starmer would travel to Brussels as early as December to signal his desire for a “fundamental upgrade” of the EU-UK economic relationship.

Labour quickly denied the briefing, which was sent to Eurasia Group clients on Monday morning, insisting that the party was sticking to its “red lines” on the EU, which include remaining outside both the single market and a customs union.

Nick Thomas-Symonds, the shadow Cabinet Office minister who is expected to be put in charge of Labour’s promised re-engagement with Europe if the party wins power at the next election, said the party position had not changed.

“Labour has long been clear that we are committed to making Brexit work. We have set out clear red lines on the future of our relationship with the European Union: no return to the single market, the customs union or return to freedom of movement,” he added.

Forging a customs union with the EU would require unravelling other parts of UK trade policy, including the trade deals signed with Australia and the 11-member Comprehensive and Progressive Agreement for Trans-Pacific Partnership.

Labour has promised to improve the EU-UK trading relationship, but within those “red lines”, saying it will seek a veterinary agreement to reduce border frictions for food products, improve touring opportunities for musicians and boost reciprocal access for professionals. 

However, internal critics of the party’s stance warn that these moves are too limited and will not be sufficient to deliver the other planks of the party’s policy platform, including an industrial strategy and being the fastest-growing economy in the G7.

Under May’s rejected deal, the UK remained in a de facto customs union with the EU and committed to high levels of regulatory alignments in areas including environmental and labour standards — a position Eurosceptics rejected as too close to the bloc.

Mujtaba Rahman, managing director for Europe at Eurasia Group, who authored the client note, said any move to structurally deepen economic ties would require Labour to take a more proactive approach than at present.

“They would need to make an early and clear move with Europe after the election, but also make an argument to the UK electorate about the benefits such an arrangement would carry for UK trade and investment and Labour’s growth agenda,” he added.

Brussels would potentially be open to such a proposal, a person briefed on the European Commission’s approach to the UK told the Financial Times, and it is monitoring what might be possible under a Starmer government.

“It would be a massive negotiation, but there would be openness from the EU side,” they added. “There’s been quite a lot of thinking on the possibilities here . . . but there will naturally be strings attached, whether financial, trade or on freedom of movement.”

Several other Brussels-based officials said they were open to a deal but sceptical that Starmer would want to make the necessary compromises. 

A customs union is possible “if conditions are met” said one EU official, but they warned there would be no special treatment for the UK.

London “would be bound by the European Court of Justice and surrender sovereignty”, said a second official. “Every time we made a new trade agreement it would automatically apply to the UK,” they added.

The 27 member states are generally in favour of closer ties with the UK but remain wary of reopening deals struck after years of bruising negotiations. “We have moved on,” said another diplomat.