The Labour Government Told Closer EU Trade Ties Are a 'Strategic Necessity' for UK Businesses

The Labour administration has been advised that securing a deeper trading relationship with the European Union is a "critical imperative" for companies in Britain, as an increasing proportion of exporters report greater difficulty to operate under the UK’s post-Brexit agreement.

Growing Business Dissatisfaction with Current Deal

Urging the government to hasten its reset with Brussels, the leading business group stated that the UK’s current TCA was not supporting them grow their sales in the EU. More than half of exporters in a poll of nearly one thousand firms – most of whom were small and medium-sized companies – said the trade deal enacted in 2021 was failing to assist.

“Following a budget that did not to deliver substantial economic expansion or trade support, getting the EU reset right is now a business-critical need, not a political choice,” said Steve Lynch.

Highlighting an ongoing economic hit from Brexit, the trade body noted this figure represented a 13 percentage point increase from the proportion of dissatisfied companies in a similar survey a year earlier. It added that just four out of the 946 firms surveyed believed government support on navigating new trade rules was comprehensive.

Political Pressure for a Closer Partnership

The intervention by the trade body – which represents more than 50,000 firms – coincides with increasing awareness within the government's senior ranks about the damage of Brexit. Recently, Wes Streeting became the latest top Labour politician to call for a deeper trading relationship with the EU, in remarks interpreted as a suggestion that Britain could join a customs union.

This kind of proposal would contradict Labour’s manifesto, which promised “no going back” to the EU single market, customs union, or freedom of movement. Starmer has also previously insisted he could not foresee any circumstances where the UK rejoined within his lifetime.

However, several ministers favouring closer EU links are thought to be part of a group who would prefer the administration to take more ambitious steps.

Business Proposals for the 2026 Reset

In a report setting out a “corporate blueprint for the EU reset”, the business group said the government must focus its work to reduce barriers to trade for exporters to support growth in the UK economy. Quoting frustrated survey respondents, it said firms were finding it ever harder to adapt to new rules in EU and UK laws since Brexit.

“Our overseas sales since leaving the EU have virtually stopped. The TCA has had no impact in recovering any sales into the EU,” said one small manufacturing firm in the North West.

The BCC outlined several main recommendations for negotiations with the EU in 2026, including:

• A deal to reduce inspections on agri-food goods.
• Completing connections between the UK and EU’s emissions trading schemes.
• Establishing a scheme for young people to work and travel.
• Gaining British involvement in the EU’s defence fund.
• Enhancing cooperation on VAT and customs simplification.

An official representative said: “We are removing red tape and trade barriers to boost employment, companies, and the economy. That’s exactly why we renewed our partnership with the EU and are making significant headway in negotiations.”