Rachel Reeves’s insistence that closer ties with the European Union represent Britain’s “biggest prize” is an outright Brexit betrayal that will cost the UK economy up to £40 billion a year, a leading think tank has warned. The Prosperity Institute said Sir Keir Starmer’s accelerating pivot towards Brussels is “fatally flawed” and will inflict lasting damage on growth, trade and sovereignty.
Re-entering a customs union — a move now openly supported by some senior Labour figures, including David Lammy and Wes Streeting — would shave 0.5% off GDP in the first year, rising to a 1.35 % collapse by year five, the equivalent of £30-40bn in lost output annually, says the Institute. Economist Fred de Fossard said: “British businesses have thrived since leaving the EU. While some people say lower trade barriers with Europe make rejoining worthwhile, the data doesn’t bear this out.
« The EU economy is in decline, demand for goods is much lower than in the past, its industrial base is being eroded and the bloc is not the economic powerhouse it once was.
« British businesses would be locked into that decline and shackled to a captive market. This is what the EU wants and we shouldn’t give it to them.”
The Institute’s report warns that deeper alignment would raise trade barriers with faster-growing markets in the US and Indo-Pacific, erode Britain’s independent trade policy (which has already secured over 70 deals worth £164bn) and expose the UK to higher regulatory costs.
Alignment would drive up AI costs by imposing a 57.5 % increase in carbon charges on data centres, reported The Telegraph.
It would also risk provoking Donald Trump and torpedoing a trade deal with the world’s largest economy. The US president has repeatedly attacked the EU’s sluggish growth and red tape.
Britain has already paid a heavy price for the “reset” deal struck last year. In exchange for aligning with EU plant and animal health rules, the UK surrendered 12 years’ access to its fishing waters.
Farmers warn the changes will wreak havoc on agriculture, imposing harsher standards on British food production. Dozens of pesticides and herbicides permitted in the UK are banned in Europe.
Labour’s decision to rejoin the Erasmus Plus programme has also come under fire. The Institute said: “It would force Britain to issue visas to tens of thousands of EU residents and spend taxpayer money subsidising European universities with little benefit to taxpayers, students, or researchers.”
The findings expose the gulf between Labour’s rhetoric and its actions. The 2024 manifesto ruled out rejoining the customs union. In December, Sir Keir insisted: “It is not currently our policy.”
However, just weeks later he suggested greater alignment, while 13 Labour MPs backed a Liberal Democrat bill to begin negotiations on a bespoke customs union.
A Government spokesman said: “We are focused on delivering deals that could add up to £9bn a year to the UK economy, supporting producers and businesses, backing jobs, and putting more money in people’s pockets across the entire country.
« Our new strategic partnership with the EU is in our national interest. It’s good for bills, good for our borders, and good for jobs, without compromising on our red lines – no return to the customs union, no return to freedom of movement, and no rejoining the single market.”
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