UK–EU reset agreement

What are the government’s objectives?

In its 2024 manifesto ⁹ https://labour.org.uk/change/britain-reconnected/  Labour committed to improve Boris Johnson’s “botched Brexit deal” which resulted in UK-EU trade being governed by the Trade and Cooperation Agreement, which came into force on 31 December 2020. It identified three specific objectives:

• “A veterinary agreement to prevent unnecessary border checks and help tackle the cost of food;
• will help our touring artists; and
• secure a mutual recognition agreement for professional qualifications to help open up markets for UK service exporters”.

In addition, it also said it wanted an “ambitious new UK-EU security pact to strengthen co-operation on the threats we face”. 

Since then, the government has also indicated a desire to look at energy cooperation and explore linkage of the UK and EU emissions trading systems. ¹⁰ https://www.ft.com/content/f03d0e82-4527-4a2e-8df8-e744f6238952  The government also reiterated its “red lines” of ruling out joining a customs union with the EU, re-joining the single market and reintroducing freedom of movement. 

What did the EU want? 

The EU has been relatively satisfied with the operation of the Trade and Cooperation Agreement. Its principal demand has been full implementation of the exit agreements, notably the arrangements for trade between GB and NI incorporated in the Windsor Framework, and safeguarding the rights of EU citizens living in the UK. It regards this as necessary “consolidation” before there is any possibility of reset.

At the time of the Brexit negotiations, the EU regretted the then UK government’s decision not to pursue more formal defence and security co-operation. The EU has always been open to that. Last year – in the run-up to the UK election – the Commission sought a mandate to open negotiations with the UK on a youth mobility scheme which would also allow EU students to study in UK universities, as they could do when the UK was a member of the EU’s Erasmus scheme.  

More recently, some member states have argued that there needs to be a long-term agreement on fishing rights: the current “transition” period in the TCA expires in June 2026 and with no future agreement, fisheries would be subject to annual negotiations. 

How are negotiations being organised?

For the UK, the reset is being led by the Cabinet Office – with Nick Thomas-Symonds as the lead minister and Michael Ellam, a second permanent secretary appointed in January as the lead official. On the EU side, negotiations are led by Commission Vice-President Maroš Šefčovič, supported by a Commission team and reporting the member states in the UK working group. 

Negotiations to date have been undertaken in secret with none of the press briefings that characterised the first phases of Brexit negotiations in 2017–18. Nor has the Commission yet sought a formal mandate which it needs before it can reach agreement with the UK on substantive changes.

What was agreed at the UK-EU Summit on 19 May?

The UK and EU agreed a common understanding under a series of headings, but these do not constitute legal texts and under most headings there is a lot of negotiating left to do, as made clear in the table below.

Key points were:

• An agreement to roll over the fishing deal agreed in 2020 until June 2038 – a 12-year extension (it would have been replaced by annual negotiations after June 2026 absent a new agreement)
• The UK to join a new Security and Defence Partnership (SDP) with the EU, along the lines of other EU partnerships with other third countries. Negotiations to begin on possible UK access to the big EU defence procurement.
• Potential deals on sanitary and phytosanitary standards and linking emissions trading systems, with the UK agreeing to dynamically align with EU rules; also pursue potential UK participation in the EU’s single electricity market.  Where UK dynamically aligns, it would be given some decision-shaping role (not a vote) – disputes would go to independent arbitration but European Court of Justice would be authority on EU law interpretation
• Exploration of balanced youth experience scheme and possible UK reassociation with Erasmus+
• Deeper co-operation on law enforcement and dealing with irregular migration.

What is the timetable?

Although there are commitments to act swiftly, the Commission will in many areas need to get formal negotiating mandates from the Council before it can finalise any agreements with the UK. There is a lot of detail to be negotiated (except on fish) involving a lot of technicalities about how to translate principles into action, agree exceptions, financial contributions etc. Similar negotiations on food safety with Switzerland took 12 months from common understanding to agreement.

But there was a commitment that these summits will become annual, and the government will be keen to show real progress from its reset by the next election.

What has the reaction been?

Most business groups welcomed the agreement, but it was denounced by one of the big fisheries organisations which had hoped to increase UK fishing rights once the initial deal expired (it was never clear that would have been delivered). Political reaction was mixed between those who saw the agreement as too timid and those who saw it as a “betrayal” of Brexit and were concerned about the possibility of more young Europeans coming to the UK and the commitment to dynamically align.

Port authorities who invested in building border control infrastructure have said they will seek compensation as this will not be needed if there is an sanitary and phytosanitary (SPS) agreement.

Will there be big benefits from the deal?

The long-run impact on UK GDP are quite small as agri-food exports are not a huge part of the UK economy. The government has also said prices should come down as business here face lower costs and it is easier to import into the UK – but the impact will be hard to see. It should make it easier/cheaper for GB exporters to move goods into the EU – which may bring down costs there. It should also reduce costs of doing business across the Irish sea border. The bigger impact may come from participation in the EU electricity market – but linking emissions trading schemes could in the short-run put up carbon prices as the EU price is higher.

One significant beneficiary of the deal is Northern Ireland: a deal on SPS, if that is reached, would radically diminish the impact of the border in the Irish Sea agreed by the Johnson government. 

Will this affect other UK trade deals?

A deal on SPS effectively rules out a comprehensive FTA with the US covering agriculture 9though the US is trying to use its reciprocal tariffs to put pressure on the EU to remove non-tariff barriers on US exports.  But in principle this looks compatible with deals we have already negotiated.  There has been no reaction to the reset from the US (yet) though the EU has said it is concerned at the UK’s selective tariff lowering in its deal with the US (which arguably breaches WTO commitments).

How might the UK-EU relationship evolve in the longer-term?

The UK-EU relationship has already improved considerably since the low points in 2022 when the UK unilaterally reneged on parts of the Northern Ireland protocol. That improvement started under Rishi Sunak with the negotiation of the Windsor Framework and UK reassociation with the EU Horizon programme.

The chancellor Rachel Reeves has suggested that there are more areas where UK business would benefit from regulatory alignment (she cited chemicals) but the EU is likely to be reluctant to allow the UK too much selective participation in the single market. The areas where the Commission is envisaging potential UK participation are ones where there is clear benefit to the EU. Interestingly, the UK has not made any major asks on services as part of the reset (beyond recognition of qualifications, which has been kicked into a dedicated dialogue). The EU has floated the possibility that the UK joins the Pan-European-Mediterranean Convention ¹² https://ukandeu.ac.uk/explainers/explainer-the-pan-euro-mediterranean-pem-convention/  which would help some businesses with rules of origin restrictions but appears to be unwilling to allow UK regulators to assess conformity with EU standards, fearing that that business would be lost to the UK. This may come back on the agenda.

However, it is possible that the need to accommodate Ukraine, potential closer co-ordination with Canada and other countries which – like the UK – are members of the Comprehensive and Progressive Trans-Pacific Partnership opens up new models of trade cooperation as countries seek to mitigate the impacts of Trump’s trade policy.  

Keir Starmer may face increasing domestic pressure to relax his red lines to be able to deliver a bigger growth dividend if growth proves elusive.