A leading think tank has warned that Rachel Reeves’s push for closer EU ties, described as Britain’s “biggest prize”, amounts to a Brexit betrayal that could cost the UK economy up to £40 billion a year. The Prosperity Institute said Sir Keir Starmer’s pivot towards Brussels is “fatally flawed” and will harm growth, trade and sovereignty.
Re-entering a customs union, now openly supported by 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, equivalent to £30-40bn in lost output annually, according to the Institute. Economist Fred de Fossard said British businesses have thrived since leaving the EU and that lower trade barriers with Europe are not worthwhile given the bloc’s economic decline.
The report warns deeper alignment would raise trade barriers with faster-growing markets in the US and Indo-Pacific, erode Britain’s independent trade policy (which has secured over 70 deals worth £164bn), and expose the UK to higher regulatory costs. Alignment would also risk provoking US President Donald Trump and torpedoing a trade deal with the world’s largest economy.
Labour’s decision to rejoin the Erasmus Plus programme has also been criticised. 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. The findings expose a gulf between Labour’s rhetoric and actions, as the 2024 manifesto ruled out rejoining the customs union, yet 13 Labour MPs recently backed a Liberal Democrat bill to begin negotiations on a bespoke customs union.
A Government spokesman said the focus is on delivering deals that could add up to £9bn a year to the UK economy, supporting producers and businesses, without compromising on red lines – no return to the customs union, no return to freedom of movement, and no rejoining the single market.
