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Sir Keir Starmer has already squandered the biggest potential dividends of his post-Brexit reset with the EU by ruling out a return to the single market and customs union, a report has warned.
The prime minister has repeatedly talked up his push to rebuild ties with the bloc after years of acrimony under successive Tory governments, promising that doing so will boost economic growth and living standards.
But the Resolution Foundation has said Sir Keir’s red lines are limiting the government’s room for manoeuvre and keeping the biggest growth dividends off limits to the UK. It cited the government’s own analysis suggesting that rejoining the single market would boost GDP by around 3.5 per cent compared with the current EU trade deal.
The think tank has called for a new “pro-growth” relationship with the EU, urging the government to be “pragmatic and strategic” about where to seek closer alignment with Europe.
And, while warning that the biggest benefits of a post-Brexit reset have been squandered, it said the benefits of a new approach “could still be substantial”.
Around half of the long-term economic damage expected to be caused by Brexit is due to ongoing regulatory divergence from the bloc, the Resolution Foundation said.
It identified agreements on professional qualifications and veterinary standards as positive steps between Britain and the EU, but said “a far more ambitious strategy will be needed” going forward.
Resolution Foundation principal economist Sophie Hale said: “Britain’s strained trading relations with the EU have caused major economic damage in recent years, so a reset certainly has the potential to boost growth.
“But it will take more than friendlier meetings and a few small-scale tweaks for farmers and touring musicians to shift the economic dial. Instead, the government will need to strategically approach where it prioritises closer alignment.”
She said an “obvious place to start” would be high-value manufacturing sectors such as chemicals and vehicles, which have high trade intensity with the EU and were hit hard by Brexit.
The report came days after Sir Keir returned from a visit to Brussels as part of his push for better relations with the EU.
The PM promised to “put the Brexit years behind us” and form a closer relationship with the bloc.
He emerged from the talks with no word on whether he would soften his stance on particular areas, but hinted a youth mobility scheme to let young people work and travel across the EU and access to British fishing waters would form part of further discussions.
He announced further talks this autumn and said a summit will be held early next year.
Campaign group Best for Britain said the Resolution Foundation report is “further confirmation that beneficial regulatory alignment with our largest market is the best way to break down barriers to economic growth”.
Director of policy Tom Brufatto said: “With regular meetings now agreed, the UK government and EU Commission can build on their promising start to work towards mutually beneficial improvements to our trading and cultural relations.”
The government has been contacted for comment.
