What is Labour's trade policy?

Following the Labour Party’s election victory in July, the new government has begun to set out its approach to UK trade policy. Ministers have already attended a flurry of international summits including NATO, the G7 Trade Ministers’ meeting, the European Political Community, and Starmer’s visits to Berlin and Paris. During these meetings, Ministers have begun to set out how they will “reset” the UK’s relationship with Europe and continue the UK’s existing trade agreement negotiations. In this article, we take stock of Labour’s progress so far and what its next steps might be.

Who’s who? 

In the week following the election, Keir Starmer appointed new ministers to his government. Rachel Reeves was appointed as Chancellor, David Lammy has been appointed as Foreign Secretary and Jonathan Reynolds was appointed as Secretary of State for Business and Trade. In a return to frontline politics, former Labour cabinet minister Douglas Alexander has been appointed as Minister of State for Trade. Nick Thomas–Symonds was appointed Minister for the Constitution and European Union Relations, based in the Cabinet Office. These new ministers will now be responsible for implementing Labour’s commitments on trade with Europe and the rest of the world. 

Europe 

Nick Thomas–Symonds is now tasked with delivering Labour’s commitments not to “return to the single market, the customs union, or freedom of movement”, but instead to “improve the UK’s trade and investment relationship with the EU, by tearing down unnecessary barriers to trade”. A reset of European relations has been promised at several events across the first months of the new government, including in the King’s Speech, which stated that the government will “seek to reset the relationship with European partners and work to improve the United Kingdom’s trade and investment relationship with the European Union”. 

Nick Thomas-Symonds has also visited Brussels to meet with EU Commission Executive Vice President Maroš Šefčovič. At the meeting, the two discussed how they “can advance our joint agenda” and further the “implementation of our existing agreements”. Commenting on the visit, Symonds said, “Our Government is committed to resetting the relationship with the European Union, to strengthen ties, reinforce our security, and tackle barriers to trade.”

In his first international visit, Business and Trade Secretary Jonathan Reynolds attended a G7 trade ministers’ meeting in Italy. Reynolds used the meeting to set out Labour’s vision for trade policy, stating that the UK was “open for business” and that it was “confident, outward-looking, future-facing and ready to play our part on the international stage”. On Europe, Reynolds stated that Labour would seek “a closer, more mature, more level-headed relationship with our friends in the European Union – our nearest and largest trading partner”. 

This has been followed by visits to Berlin and Paris, by Kier Starmer. Whilst in Berlin Starmer launched negotiations on an UK-Germany cooperation agreement that would be designed to “boost business and trade, deepen defence and security cooperation”. The UK and Germany will now spend the next 6 months, negotiating the agreement, with a target date of “early 2025” for completion. The UK government’s press release can be found here. In Paris the Prime Minister met with French President Emmanuel Macron, to discuss trade, defence and security.  The UK government hopes that these meetings will set a positive tone for future negotiations with Europe. 

The UK and the EU will begin the review of the TCA by 30 December 2025 with the bulk of the work expected to take place in 2026.  In our 2024 Attitudes to Trade Survey we found that 46% of business expected  the TCA review to result in a closer relationship with Europe. The government’s own red lines of not rejoining the Customs Union or the Single Market limit the potential for substantial market access easements for goods and services. However, there are a number of other avenues that the government may seek to negotiate on, including:

Security: On his first international visit to the NATO summit, Keir Starmer commented on a possible new security partnership with the EU, saying, “I do think there is scope for a significant improvement of our defence and security relationship with the EU”. This new pact may be of interest to businesses beyond the defence sector, given Labour’s vision of security cooperation, also encompassing energy, new technology, pandemic preparedness, and space capabilities. David Lammy’s articulation of this vision can be found in his speech to the Chatham House think tank here.

Deeper support for trade in services:  In an interview with the Financial Times, before taking office, the Chancellor Rachel Reeves suggested that Britain could pursue new regulatory arrangements for specific sectors and greater recognition of professional qualifications. This could make it easier for regulated professions, such as accountants, lawyers, and architects to operate across Europe.  However, implementing such arrangements could be highly complex and take some time.   

Sanitary & Phytosanitary (Food & Plant Health): There is no SPS agreement included in the TCA, and Labour has been clear that it intends to negotiate a new veterinary agreement to ease the movement of relevant goods through customs by limiting documentary and physical checks on imports and exports of ‘Plants and Products of Animal Origin’.  This could make it easier for UK producers to export to the EU, as well as making imports of EU foods easier.  However, an SPS agreement which results in closer alignment with EU rules could have the potential to limit the UK’s room for manoeuvre in future trade agreement negotiations. 

Mobility: The TCA could be extended to include greater support for the temporary movement of people. This would help to resolve the challenges faced by touring musicians – for example - as well as being of wider interest to businesses. A youth mobility scheme has been proposed by the EU but was rejected by the Labour party whilst they were in opposition.  Separately, a UK government spokesperson has also been quoted as rejecting a return to the Erasmus Programme, showing that any increased mobility will be difficult for the UK and the EU to agree. 

Conformity Assessment: The UK and the EU may be able to pursue a mutual recognition agreement for conformity assessment. The new government has already introduced a Product Safety and Metrology Bill to allow it to “recognise new or updated EU product regulations, including the CE marking”. Mutual recognition of conformity assessment was a UK ask in the original TCA negotiations but was declined by the European Union. 

ETS and CBAMs: The previous Conservative government announced a consultation on a new Carbon Border Adjustment Mechanism (CBAM) in March 2024. As things stand currently, the UK and EU’s Emissions Trading Systems (ETS) have materially different carbon prices and whilst a linking would reduce friction, it may take a long time to be achieved. The EU and UK’s proposed CBAMs are not aligned either, with different products in scope, a different timeline to enter into force and are very different in nature. The Labour government has so far given little indication of its intention for either the UK ETS or the UK CBAM.

Despite talk of a reset from several European leaders at the European Political Community meeting, negotiations with the EU are expected to be lengthy and challenging. A document reported in the Financial Times stated that the European Commission had issued the UK government with a list of 8 requests, where the Commission argues that the UK must do more to fully implement the terms of the original Withdrawal Agreement prior to meaningful new negotiations commencing. Separately, the Commission has restarted legal action against the UK for allegedly failing to implement its commitments on citizen’s rights. All of these factors will contribute to the mood music around the opening of new negotiations on the above topics. 

Rest of World 

The government has announced its intention to continue with the UK’s ongoing trade negotiations, including those with the Gulf Cooperation Council, India, Israel, South Korea, Switzerland and Turkey. The government also pledged to publish a trade white paper which will support policies in the areas of net zero, industrial strategy and security. Commenting on the announcement, Trade Secretary Jonathan Reynolds said, “From the Gulf to India, our trade programme is ambitious and plays to the UK’s strengths to give British businesses access to some of the most exciting economies in the world”. 

India: Labour’s manifesto states its support for pursuing a “new strategic partnership with India, including a free trade agreement”. Indian Commerce Minister Piyush Goyal has told the Financial Times that the UK and India are “pretty much on board on most of the issues we have discussed” and that an agreement could “close very quickly”. However, Goyal also warned that the negotiations should not have a deadline and that any agreement reached must be “equitable, fair, and balanced”. David Lammy visited India at the end of July for talks with Goyal, but no substantial update on progress was issued.

Gulf Cooperation Council (GCC): Labour’s manifesto did not explicitly commit to concluding negotiations with the GCC, however, since the election, Reynolds has met with the GCC secretary-general Jasem Mohamed Albudaiwi. After the meeting, it was reported that the two sides had agreed to conclude an agreement by the end of the year. 

CPTPP: Peru has now joined Japan, Singapore, Chile, New Zealand and Vietnam, in ratifying the UK’s accession instrument.  This means that the agreement will now enter into force with those members by 15 December. We’ve assessed what’s in the agreement and what it could mean for UK businesses in our insight written at the time the UK reached agreement in principle. 

Investment 

The government has announced a major International Investment Summit, to take place on 14 October 2024. The summit aims to signal that the UK is "open for business," and that the UK is a “pro-business environment that supports innovation.” The summit will be addressed by the PM and Cabinet Ministers, who will set out how the UK intends to grow inward investment in the future. Investors, including BNY Mellon, Blackstone and CyrusOne have been announced as attending. The government’s press release can be found here.

The government has also announced that it will align the UK Infrastructure Bank and the British Business Bank in supporting a new National Wealth Fund (NWF). The NWF will be backed by £7.5bn of new funding but will aim to attract twice that number in investment from the private sector. The NWF’s investments will be focused on the industries of the future, in particular green energy. Further detail on the fund is expected later in the year. 

What should I be doing now? 

The new government will attempt to deepen the UK’s trade relationship with the European Union, and the next few months will be vital for businesses to put their case for change to the new government. Meanwhile, negotiations with the world’s fastest growing markets are set to continue, offering the prospect of greater export opportunities to UK firms over the next year. 

Whether you’re in goods or services, large or small, you should be evaluating your operations, supply chain and investment decisions to position your business to take advantage of these developing relationships. For support in assessing your priorities, Deloitte’s specialists are on hand to help.