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The Labour administration has been advised that securing a deeper trading relationship with the European Union is a "strategic necessity" for British firms, as an increasing proportion of exporters report greater difficulty to operate under the existing post-Brexit trade deal.

Growing Exporter Frustration with Current Deal

Calling on Labour to accelerate its reset with Brussels, the leading business group stated that the UK’s existing trade and cooperation agreement was failing to help them increase exports in the EU. More than half of exporters in a survey of almost 1,000 businesses – most of whom were SME companies – said the trade deal enacted in 2021 was failing to assist.

“With a budget that failed to deliver substantial economic expansion or trade support, securing a successful EU reset is now a strategic necessity, 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 trade policy changes was comprehensive.

Calls for Action for a Closer Partnership

This statement from the business group – which speaks for tens of thousands of companies – coincides with growing recognition within Labour’s frontbench about the economic impact of leaving the EU. Recently, a senior Labour figure became the latest top Labour politician to advocate for closer economic ties with the EU, in remarks seen as hinting that Britain could join a customs union.

This kind of proposal would contradict Labour’s manifesto, which promised “no return” to the EU single market, customs union, or freedom of movement. Starmer has also previously insisted he could not foresee a situation where the UK re-entered the EU in his lifetime.

However, several ministers favouring closer EU links are thought to be part of a group who would like to see the government go further.

Business Proposals for the EU Negotiations

In a report setting out a “corporate blueprint for the EU reset”, the business group said the government must prioritise its efforts to minimise trade friction for exporters to help boost the UK economy. Quoting frustrated survey respondents, it said firms were finding it increasingly difficult to adapt to new rules in EU and UK laws since Brexit.

“Our overseas sales since leaving the EU have all but ceased. The TCA has had no impact in recovering any sales into the EU,” said one small manufacturing firm in Greater Manchester.

The BCC outlined five key proposals for talks with Brussels in 2026, including:

• An agreement to reduce inspections on animal and plant products.
• Completing connections between the UK and EU’s carbon markets.
• Creating a youth mobility scheme.
• Gaining British involvement in the EU’s security and defence fund.
• Improving collaboration on tax and border simplification.

A government spokesperson said: “This government is cutting bureaucracy and trade barriers to boost employment, companies, and the economy. This is precisely the reason we renewed our partnership with the EU and are making significant headway in negotiations.”