Will Keir Starmer’s ‘EU reset’ deliver in 2026?

It has been clear since Labour won the general election in 2024 that the UK would seek closer ties with the EU than its string of Conservative predecessors. But while the EU has welcomed Keir Starmer’s mood change, it is far from clear that a deeper economic relationship with the UK is high on its priority list. That means the government will have its work cut out to convert words in 2025 into concrete actions in 2026.  

So far the EU has done better at securing its objectives  

One of the Starmer government's final acts of last year was to sign up to reassociate with the EU’s Erasmus+ scheme – albeit for one year only (2027–28) and at a cost of £570m. This either represents a great deal because the EU’s initial ask was for the standard ‘third country’ rate from which the UK managed to wrangle a 30% discount, or represents a pretty awful deal because as an EU member the UK contribution used to be much smaller (to an admittedly much smaller scheme).  

Its economics are predicated on 100,000 UK participants taking advantage of the scheme (far more than used to participate in its predecessor when we were a member state), the EU was very keen to see the UK reassociate and it’s a lot of money which could have been used to tackle some of the many problems which beset the current government. Although a lot of people in the UK have reacted very positively to the new opportunities created by us rejoining Erasmus+, in negotiating terms it was the EU members  who were very keen to be able to offer the chance to come to the UK under it to their citizens. Until its belated conversion to the benefits for the UK, the government had been denying that it wanted to get back into the scheme.  

So, just as with last May’s Common Understanding, which extended the fishing deal originally negotiated by Boris Johnson, it is the EU who got the win. The UK also failed to achieve acceptable terms for participation in the big EU defence procurement scheme, SAFE, negotiations for which went down to the wire in late November. In the end, while Canada was allowed in as a third country, the terms offered to the UK were so bad that the government walked away to watch the EU prioritise its own defence industries over cross-continent defence capacity.  

Watch our event on the UK-EU reset: six months on

Starmer did get some Christmas cheer

There were a couple of decisions in late December that did benefit the UK. One was on data sharing. The EU decides whether the UK meets its standards of “data adequacy” to allow for data transfers between the UK and EU countries; the original decision was due to expire last summer but the EU extended to the end of this year, and has now extended it all the way to 2031. Electricity was another boost: UK electricity exporters will benefit from changes to how the EU’s Carbon Border Adjustment Mechanism works (as will EU consumers), though the EU did not agree to an exemption from the CBAM applying to UK exporters from the beginning of 2026.  

The UK needs to land its own wins in 2026 if the reset is not to look totally one-sided

Keir Starmer and his team have done well in improving the mood music in Europe. But they were too quick to claim that they landed “deals” in the Common Understanding and that potentially puts them in a weak negotiating position. The reset matters much more to the UK government than it does to the EU. It is also taking place against the backdrop of the EU needing to set its budget for the next seven years (the reason for the one-year deal on Erasmus+) with pressures compounded by the loss of UK contributions.  

There is now a timetable at least for the first time. The Erasmus announcement also included a commitment to conclude negotiations on creating a common sanitary and phytosanitary area (a big UK ask for the agriculture and food sector), the youth “experience” scheme and ETS linkage by the next UK-EU summit. That would be a harder deadline if the date for the summit had been set, but there is an expectation it should be next summer. Negotiations have also been started on UK participation in the EU electricity market.  

However, it looks as though the EU may make quite wide-ranging demands on alignment as a price for any deal – and may seek financial contributions going well beyond the administrative costs of schemes. Having accepted the principle of dynamic alignment, No.10 needs to make sure it confines its scope. That may mean playing hardball on the remaining big EU ask on an expansive youth experience scheme, not least to protect itself against its Brexiter critics.

It is far from clear that the EU is as interested in the relationship than the UK is

There now seems to be a view within the Labour Party that the initial reset asks were too timid and would not contribute enough to reigniting the UK economy. The debate has moved from whether to how to get closer. Wes Streeting and David Lammy have floated the idea of forming a customs union with the EU which would help with paperwork and rules of origin concerns for exporters but nix much of the UK’s independent trade deals.  

Starmer has countered with a suggestion of more ‘Swiss style’ selective alignment with the single market in return for better access beyond agriculture and electricity currently being negotiated, which would allow him to maintain the UK’s independent trade policy that he seems to value as much as his Conservative predecessors.  

But as with the long pre-Brexit debates, where the focus was invariably on what the UK wanted or could accept, it’s far from clear that the renewed enthusiasm in the UK is shared by the EU who would, on current form, demand a high price if they were prepared to negotiate at all.