The EU and UK have announced a “reset” of their relationship some four years after the original post-Brexit Trade and Cooperation Agreement between the two sides came into force.
The three-part deal includes commitments to work together on a new security and defence partnership and measures to improve trade in agrifoods and electricity.
Overall economic impact
Sir Keir Starmer said that the “reset” deal would boost the economy by £9bn a year by 2040, but analysts said this will only recoup a tiny fraction of the costs of Brexit.
The Office for Budget Responsibility continues to forecast that Brexit will have a 4 per cent long-run hit to GDP, and will shrink UK imports and exports by 15 per cent.
The government estimated the GDP uplift from the “reset” deal at 0.3 per cent in 2040 — an increase that Paul Dales, UK economist at Capital Economics, said was not a “game-changer” for the economy.
He added the deal was only “chipping away” at the costs of leaving the EU single market. “You are not reversing Brexit in terms of the economic changes.”
Benefits have been limited by government’s self-imposed red lines that prevent the UK from rejoining the single market or a customs union, added Andrew Goodwin of Oxford Economics.
Others have been more optimistic: Research group Frontier Economics suggested “deep” regulatory alignment on goods trade could increase GDP by 1-1.5 per cent — though such an expansive realignment appears a long way off.
Easing food and plant exports
A veterinary agreement between the two sides — the most significant element of the deal — will reduce the need for costly checks and certificates on animal and plant products, reducing red tape for exporters and lowering prices for consumers.
Food and drink exports to the EU have fallen by more than a third since 2019 as businesses struggled to meet the bloc’s requirements, according to the Food and Drink Federation lobby group
However, an Aston University study estimated that UK agrifood exports to the EU could be boosted by more than 20 per cent as a result of a high-alignment veterinary agreement.
UK producers and retailers that continued to export to the EU complained that conforming to the post-Brexit rules added thousands of pounds in costs to each load they shipped.
Supermarkets hope that a deal could be completed early next year, according to one retail executive, allowing them to shut down post-Brexit trade compliance departments that cost millions of pounds a year.
The UK will need to align with the EU’s rules on animal and plant health, prompting opposition parties to accuse Starmer’s Labour government of once again making the UK a “rule taker” from Brussels.
But Peter Hardwick, trade policy adviser at the British Meat Processors Association, said this was a “common misunderstanding” because the UK already has to abide by EU standards to export to the bloc.
Concessions on fishing
The chief concession has seen the UK extend EU fishing access to British waters for 12 years, a decision the Scottish Fishermen’s Federation labelled as “disastrous”.
The deal cements the existing agreement, which has seen EU catches in UK waters drop a quarter in five years.
UK negotiators initially offered access for only four years, but agreed to 12 years after late-night talks to win the larger economic prize of the veterinary agreement.
UK food and drink exports to the EU were £14bn in 2024. In contrast, fishing accounted for just 0.04 per cent of economic output. The UK is even a net importer of fish, its fleet has almost halved in the past 30 years.
Starmer argued that the concession is worth it to secure the vet deal that will allow UK salmon and shellfish producers to export more easily to the EU.
The UK exported around £1.2bn in fish and shellfish to the EU in 2023, according to UK government statistics — a figure that industry body Salmon Scotland said would be boosted by the deal.
Relinking to the EU energy market
In a concession to London, Brussels committed to work towards reintegrating the UK into the EU’s internal energy market, enabling the smooth trading of electricity between member states.
Requiring separate power auctions after Brexit has cost the UK around £400mn. Having a single internal market would cut costs and boost the investment case for renewable energy projects in the North Sea.
Consultancy Baringa estimated that total savings for consumers from an integrated market could reach €44bn a year.
In a surprise to the industry, the two sides agreed to work out “in detail the necessary parameters” for the UK to rejoin.
“It’s a real coup,” said Adam Berman, deputy director of the industry lobby group Energy UK, that would give an “immediate sense that the UK and EU are willing to take barriers away from [renewable energy] projects.”
There are also talks on linking the UK and EU’s emissions trading systems, though it is unclear whether these will be completed in time for the UK to avoid a new carbon border tax called CBAM that comes into force next January.
Security and defence partnership
A new security and defence partnership — which was not part of the original post-Brexit deal — is another step forward in rebuilding the EU-UK relationship.
The wide-ranging deal is similar to those the EU has signed with six other countries including Japan, South Korea, and North Macedonia, and opens the door to restoring the institutional co-operation that was ruptured by Brexit.
The UK foreign secretary and EU high representative for foreign affairs will have twice-yearly meetings and regular invites to top-level EU meetings, including quarterly European Council summits.
The document sets out a long list of aspirations for the relationship, including dialogue on cyber security. The pact also opens the door for the UK to negotiate participation in the EU’s €150bn loans-for-arms fund, which would be a win for UK defence industries which create £10bn in annual exports, according to lobby group ADS.
However the terms of the deal are still to be determined, leading ADS chief executive Kevin Craven to describe the pact as “somewhat underwhelming in the lack of detail”.
But Lord Peter Ricketts, former UK national security adviser, said there was significant value to restoring institutional ties with the EU. “We have lost countless opportunities to influence their thinking and planning on issues which matter to us. The host of new dialogues agreed today will give us back a role in decision shaping.”
Youth and professional mobility
The political challenges of the “reset” are clear in Labour’s reluctance to embrace Brussels’ request for a youth mobility scheme to enable 18-30 year olds to live and work more freely across the EU and UK.
The document leaves open the question of how large any such scheme will be, saying only that the number of participants must be “acceptable to both sides”, setting up a difficult negotiation to come.
There is no offer of a deal for touring artists, a Labour manifesto pledge. On business mobility, there is only a vague commitment to “set up dedicated dialogues” on business visas and the recognition of professional qualifications, another manifesto promise.
