As Labour prepares to return to government, it is absorbing advice on how to repair and improve the United Kingdom’s scarred economic relations with the European Union. Meanwhile, the bloc is currently looking elsewhere; but its ambition of integrating security and economic policies will present it with a new UK-related dilemma going forward.

Recovering from chaos and decline

Earlier this week, the UK’s Labour Party gathered in Liverpool for what was likely to be the last party conference before the next general election, widely anticipated for either spring or autumn of next year. Polling suggests that growing the economy and escaping the punishing, once-in-a-generation cost of living crisis is top of the list of UK voters’ concerns, with immigration, health and housing following closely behind.

Improving relations with the EU does not appear to be at the forefront of voters’ minds, owing without doubt to the complexity of the issue, but above all to its political sensitivity, with the country still beginning its recovery from the divisiveness and toxicity of Brexit. The subject is avoided by Labour – at least in public – who worry that slipping up will damage its otherwise strong prospect of victory.

The result was a conference in Liverpool in which economic growth featured highly (Keir Starmer’s keynote speech was mainly about distributing future spoils more fairly), whilst any connection with the continent was almost entirely absent from the overriding narrative.

Senior politicians pointed if at all to individual European initiatives – one example being Rachel Reeves (Labour’s proposed Chancellor of the Exchequer) lauding France’s innovative Tibi scheme to finance technology companies.

Regulatory rapprochement

This has not prevented the UK’s think tanks, research institutes and trade bodies from proposing a range of ideas and proposals to Labour politicians and strategists.  The aim is to rebuild trust with the EU and look for improvements to the Trade and Cooperation Agreement (TCA), which governs EU-UK trade, a matter of critical concern to the UK economy.

These ideas are designed to boost growth whilst, crucially, staying on the right side of the UK’s current political red lines – notably keeping the European Court of Justice (ECJ) at bay and remaining outside the customs union to enable the UK to sign new global trade deals.

The broad direction of travel called for by UK-based experts is one of deep regulatory alignment and sector-specific deals, going as far as voluntary, statutory commitments on the part of the UK Parliament to align with EU standards in key sectors.

Politically, this must be preceded by a return to the middle-ground that Brexit obliterated, causing politicians to descend into the types of tribal comfort zones better known in the US, and involve the kind of genuine consultation with the UK’s business sector and civil society that never occurred during or after the referendum.

The bigger objective of these efforts is to reduce trade frictions and bring about much-needed certainty for UK businesses, which have risen and fallen, respectively, as a result of Brexit, with immense damage to the UK economy, as predicted by many in advance.

The EU is distracted

None of these proposals, however, fail to point out that the dramatic decline in UK economic leverage, combined with the EU’s deeply embedded incentive to protect the single-market, means that EU interests will be the ultimate reality-check in any new negotiations. And that Brussels’ attention is currently directed elsewhere.

And they are right, at least at first sight. The EU in the autumn of 2023 is not that of the summer of 2016; the key development is a growing intent to stand up for its interests more assertively.

The EU is looking – and acting – to project its power in a world where, for the first time, the number of authoritarian states outnumbers that of democracies. Its industrial strategy (such as the Green Deal Industrial Plan, the Net Zero Industry Act, or the Chips Act) is designed to bring supply chains back to Europe, boost production capacity in key industries and make the bloc less dependent, more resilient and more competitive.

Underpinning these ambitions are major institutional reforms designed to hold the EU together at its core, such as the creation of a Recovery and Resilience Fund and an attempt to re-think its cohesion policy, which takes up the lion’s share of the EU budget. Most recently, the matter of enlargement, arguably the EU’s most far-reaching and effective foreign policy, is back in full swing, with new ambitions touted for 2030.

What does the UK have to offer?

From a UK perspective, the EU appears to be grappling with bigger issues, and on those rare occasions when attention shifts to the UK, the messages are usually disappointing. When a senior EU official in charge of the TCA, for instance, spoke at the annual conference of the EU-UK forum, his message sent a chill down the spine of Anglophile listeners.

The current deal with the UK, he explained, suits the EU well. Therefore, the much-vaunted review due in 2025 will focus on implementation rather than substantial change. Put simply, there is no reason for the EU to reconsider the deal without a new mandate from the EU Council or the UK putting something new on the table.

Such UK economic “gives” are, of course, a matter of enquiry for UK experts. Often listed are the fields of mobility (where the EU wants a better deal for its citizens), fishing (where substantial UK reserves are of interest to European fishers) and energy (where an energy-craving continent is eyeing up the UK’s strength in offshore renewables).

And, of course, the EU has an interest in the UK’s innovative prowess. With four of the world’s top universities located in the UK (the EU has none), the UK has an abundance of world-class research – which the UK is significantly better at commercializing than the EU.

The bigger prize, however, is arguably outside the field of traditional economics, where the UK will clearly remain a junior partner.  The key area of UK strength, viewed from the perspective of an increasingly geopolitical EU, is, of course, its historical role as a major security and defence player.

This includes being a key NATO member, a permanent member of the UN Security Council (UNSC), boasting a world-class intelligence community, global diplomatic reach and a soft-power appeal that even the Brexit saga will not have killed off entirely.

No simple trade-off

From a UK perspective, of course, conflating its offer on defence and security with a better trade deal will be viewed as problematic – if not downright unsavoury – and rightly so.

The UK’s historical responsibility in NATO and in the UNSC stands for itself and remains independent of any anticipated economic advantages. It is no coincidence that the conflation of economic and security policy has not been publicly brought up by UK decision-makers in the bitter battles over Brexit.

Interestingly, however, such a conflation is occurring on the EU side, albeit for reasons that initially seem to have little to do with the UK.  In its first-ever Economic Security Strategy of June 2023, the bloc has begun to set out how meshing economic and security thinking will be part of a safer European future.

The 10-page document was a joint effort by those parts of the Commission that manage the EU’s economic and foreign policy portfolios, Margrethe Vestager, the Commissioner for Competition, and Josep Borell, the High Representative for Foreign Affairs (albeit with substantially different political mandates and legal competences).

The bigger aim of the strategy was set out by Commission President Ursula von der Leyen herself, who stressed that the competitiveness instilled by global integration and open economies remains a force for good for Europe, but “… given the changing nature of the risks, we now need a strategic vision for how we are going to handle these risks.”

For Josep Borell, protecting the EU’s economic interests means that “we are entering fully the realm of the Common Foreign and Security Policy (CFSP)…” which has “clear instruments that we can use to this end.”

Put simply, the paper acknowledges the end of the old, optimistic world, where hope thrived that integrating countries like Russia or China into the global economy would lead to their democratisation, whilst merrily trading in the meantime was economically beneficial to all.

The limitations of Germany’s policy of Wandel durch Handel – change through trade – with Russia are the most prominent example. Rather, according to the new EU thinking, novel approaches are necessary to handle such tensions against the broader background of global systemic rivalries.

The strategy itself does not go on to set out concrete measures on how precisely this is to occur and has been received as a conversation starter offering general direction rather than a policy document. There remains much to be scoped out, though the document does contain an initial conceptual framework centred around “… promoting, protecting…” and, interestingly, “…partnering”.

Teaming up for economic security?

Such partnering, according to Borrel, means that the EU “…will also have to intensify the cooperation with third countries on economic security issues, adding “…we have started to work closely with our like-minded G7 partners on these issues.” Indeed, the G7 repeatedly highlighted as an “important avenue for cooperation on economic security”, a concrete aim being the “implementation of existing FTAs as part of a geo-economic toolbox that will ensure economic security for Europe”.

Labour’s approach in this field has been termed “securenomics” by Rachel Reeves, influenced in part by “Bidenomics” and generally close connections to Democrat thinking. Reeves sets out her vision in “A New Business Model for Britain”, arguing that this means “building the industries that guarantee Britain’s economic security, forging resilience at home”, and – crucially –  “creating new partnerships abroad and bringing together an active state in partnership with a vibrant market.”

The 33-page document mentions the EU only in the context of Labour’s current red lines and its hope of improving aspects of the TCA, in line with Labour’s strategy of treading carefully on the issue. But Shadow Cabinet Member Nick Thomas-Symonds, who oversees much of Labour’s thinking on EU relations, stressed in Liverpool that “domestic, foreign, trade and industrial policy are deeply intertwined”.

What is certain is that the UK qualifies for what the EU calls a “like-minded partner.” How to join the dots with Labour’s “securenomics” strategically could emerge as an interesting case study for the EU’s economic-security conflation in practice, with indeed further implications for managing partnerships with allies.

But as the bloc moves forward in its quest to be a more sovereign player on the world stage, harbouring an unequal economic relationship with a key European ally – that is, boiling the British frog economically whilst relying on its security and defence resources – will be a contradiction increasingly difficult to manage.

About the author

Jake Benford is a member of Bertelsmann Stiftung’s Europe Programme, where he currently focusses on economic cohesion in the EU as well as more broadly on relations with the UK.

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