The biggest obstacle to Starmer’s Brexit reset

“The world has changed since 2016. And Brexit today looks quite different. It has damaged our economy and there’s no doubt in my mind where the national interest lies. Britain must be at the heart of a stronger Europe on defence, on security, on energy and on our economy,” Starmer wrote.

Attending the European Political Community summit on Monday, Starmer said the UK would push to join the EU’s £78bn loan for Ukraine which he said would be “very good” for relations with the EU and for UK jobs.

But he faces ever more difficult choices to get what he wants from a bloc that has other priorities. The EU is happy to play hardball with the UK and has made it clear that if Britain wants closer ties with Europe, it will need to stump up the cash. Already, EU negotiators have hinted that Britain would have to make payments of around £1bn a year for access to the single market.

Since a summit in London last May, UK-EU negotiations have been under way. The hope is that at least some of them might be completed before the next summit – scheduled, as far as we know, for June or July. Then what? The simple answer is that we don’t really know. There is, however, a real danger that, at this point, Starmer’s “reset” might run out of steam.

So, where are we now? Last May’s summit fired the starting gun for negotiations in four areas. Agriculture, potential linkage of the UK and EU emissions trading schemes (ETS), possible UK participation in the EU’s electricity market and a youth mobility scheme (now referred to as youth experience because we Brits are apparently allergic to mobility).

It is hard to know for sure what the state of play is, but it is possible to hazard an educated guess. Progress is being made on ETS as it is on agriculture – though on the latter, there are question marks over the scope of regulatory alignment the EU will demand from the UK.

Talks on electricity market participation, on the other hand, will hinge on the cash demands the EU makes of the UK. The negotiating mandate signed off by member states refers to a “permanent mechanism” for UK payments into the EU’s funds for reducing divergence between its regions. As we saw in (failed) talks over the EU’s Security Action for Europe (Safe) programme, the scale of EU demands could decisively shape the outcome of the talks.

Finally, there is the youth experience. The Home Office is, of course, unenthusiastic about a scheme that might see significant numbers of Europeans coming to the UK, and there has been much haggling over a potential cap on numbers. Perhaps more significantly, the EU is insisting that European students should be eligible to pay domestic fees if they study at UK universities. The Russell Group of elite institutions has, for its part, carried out modelling that suggests the costs of this for universities might run to £580m.

As I write this, it is not clear whether the two sides will be able to arrive at a compromise. What is clearer is that if they don’t, the whole package might fail. The European Union is more interested in youth experience than it is on anything else being discussed. And its unlikely to agree to sign off an agreement on, say, agriculture unless it gets what it wants.

So, the outcome of the current round of talks hangs in the balance. As do the next steps in the relationship. There would, after all, be little point in holding the much-anticipated summit in the absence of evidence of concrete progress for the leaders to celebrate.

Even if the current negotiations succeed, it is unclear how the relationship might develop after the victory lap at the summit. On the UK side, the Government is increasingly happy to cite the figure of 8 per cent as the impact of Brexit on the UK economy. It is equally anxious to reiterate its red lines of not joining the single market, a customs union or accepting freedom of movement. Consequently, it would like to secure deals to permit alignment and market access in several sectors beyond those already under discussion.

On the EU side, this approach is rejected as “cherry-picking”. Even in the unlikely event that this situation changes, and some element of further sectoral alignment in return for access be agreed, it will come at a significant cash price. As the EU mandate for the electricity talks puts it, the UK’s financial contribution should “should appropriately reflect the relative size of the UK’s economy and the proportion of the internal market in which the UK aims to participate”.

There is thus a risk that the gradual improvement in relations that we have witnessed starts to lose momentum at a point when those limited steps taken thus far are far from beginning to compensate for the overall economic impact of Brexit. And this might prove to be an uncomfortable situation for the Government.

Brexit is no longer a priority for a European Union that is relatively happy with the trade deal signed with the UK and has other priorities to attend to. For the UK, however, not only have Starmer, and particularly the Chancellor, Rachel Reeves, been clear about the economic impacts of Brexit, but the increasing fragility of the so-called special relationship has also pushed them towards seeking closer link with their European neighbours.

Yet, now Starmer and co. need to figure out what this means in practical terms. Warm words and friendly meetings can only get us so far. If the UK really wants to move closer to the EU in practical terms, it is going to have to make some difficult choices.

Anand Menon is Director of UK in a Changing Europe, a Director at Public First, and Professor of European Politics and Foreign Affairs at King’s College London