The Looming Brexit Reckoning: Why a Customs Union May Be Inevitable by 2026
One in five people in the UK are now skipping meals. That stark statistic, revealed by TUC polling, isn’t just a symptom of a cost of living crisis; it’s a flashing red warning light on the economic consequences of Brexit. As pressure mounts on Labour to offer more than incremental change, and with the possibility of US and Indian trade deals hanging in the balance, the debate over a customs union with the EU is no longer a fringe discussion – it’s rapidly becoming a central question of the next general election.
The Shifting Sands of Labour’s Brexit Position
For years, Labour has officially ruled out rejoining the EU customs union, a position enshrined in their manifesto. However, cracks are appearing. Senior figures like Health Secretary Wes Streeting and Deputy Prime Minister David Lammy have increasingly voiced concerns about the economic damage inflicted by Brexit, subtly hinting at a willingness to reconsider closer ties with Europe. This shift isn’t happening in a vacuum. Thirteen Labour MPs recently backed a Liberal Democrat bill pushing for negotiations on a bespoke customs union, demonstrating a growing internal appetite for a change in direction.
The Conservative party and Reform UK remain staunchly opposed, framing any move towards a customs union as a betrayal of the Brexit vote. But their rhetoric masks a growing anxiety. The economic realities are biting, and the promised benefits of independent trade deals have largely failed to materialize. The TUC, under the leadership of Paul Nowak, is making a powerful case that a closer relationship with the EU is essential for industries like aerospace, automotive, and steel – sectors vital to the UK economy.
What Does a Customs Union Actually Mean?
At its core, a customs union eliminates tariffs and other trade barriers between member states. This simplifies trade, reduces bureaucracy, and lowers costs for businesses. However, it comes with a significant trade-off: the inability to negotiate independent trade deals. A customs union operates under a common external tariff, meaning the UK would be bound by EU trade policy with countries outside the bloc. This is the central point of contention, with critics arguing it would undermine the sovereignty gained through Brexit.
Key Takeaway: A customs union isn’t about reversing Brexit entirely; it’s about pragmatically addressing the economic fallout and prioritizing stability and access to the EU market.
The Cost of Living Crisis and the Brexit Link
Paul Nowak’s assessment is blunt: a “bad Brexit deal” is a major contributor to the soaring prices in UK supermarkets. While global factors undoubtedly play a role, the increased trade friction and regulatory divergence caused by Brexit have added significant costs to food imports. This isn’t just an economic argument; it’s a political one. Research from the Joseph Rowntree Foundation shows that financially insecure voters are abandoning Labour at a higher rate than those who are more secure. Nowak understands this, and is framing the debate around a customs union as a way to alleviate the cost of living crisis and win back lost support.
Did you know? The UK’s trade with the EU has fallen significantly since Brexit, while trade with non-EU countries has not fully compensated for the loss. Data from the Office for National Statistics reveals a persistent trade deficit with the EU.
Beyond Trade: The Impact on Workers’ Rights
The debate isn’t solely about economics. The newly enacted Employment Rights Act, while a step forward, has seen Labour back down on key promises, such as extending unfair dismissal rights from day one of employment. Nowak is pushing for full implementation of the Act and stronger protections for workers, arguing that improved rights are essential for boosting living standards. He’s also advocating for a crackdown on employers who attempt to prevent union organization, a move that could significantly empower workers and shift the balance of power in the workplace.
Expert Insight: “The Employment Rights Act is a crucial piece of legislation, but its impact will be limited if its provisions are watered down or delayed. We need to see a genuine commitment to empowering workers and ensuring they have a voice in the workplace.” – Paul Nowak, General Secretary of the TUC.
The Rise of Discontent and the Challenge to Labour Leadership
The political landscape is becoming increasingly volatile. Labour’s struggles in the polls, coupled with the rise of Reform UK, highlight a deep-seated discontent among voters. The recent election of Andrea Egan as leader of Unison, the UK’s largest union, signals a desire for a more radical direction. Egan’s victory, fueled by dissatisfaction with the perceived closeness of the previous leadership to the Labour party, underscores the growing pressure for change.
Pro Tip: Businesses should begin scenario planning now, considering the potential implications of a shift towards a customs union. This includes assessing supply chains, regulatory compliance, and potential trade opportunities.
Looking Ahead: 2026 as a Critical Juncture
Nowak believes 2026 is the year the government must “get to grips” with the cost of living crisis. He’s right. The economic pain is unlikely to subside without significant intervention. The question is whether the government, or a future Labour administration, will have the courage to seriously consider a customs union with the EU. The political obstacles are considerable, but the economic imperative is growing stronger by the day.
The potential for a shift in policy is further amplified by the precarious position of the current Prime Minister. As Nowak points out, if the government can deliver on improving living standards, the polls may well improve. However, the underlying issues – the economic fallout from Brexit and the growing discontent among voters – will remain unless fundamental changes are made.
Frequently Asked Questions
Q: What are the main benefits of a customs union with the EU?
A: Reduced trade friction, lower costs for businesses, and greater stability in supply chains are key benefits. It would also simplify regulatory compliance and potentially lower prices for consumers.
Q: What are the drawbacks of a customs union?
A: The primary drawback is the loss of the ability to negotiate independent trade deals. The UK would be bound by EU trade policy with countries outside the bloc.
Q: Could a customs union be negotiated quickly?
A: No. Negotiations would be complex and time-consuming, potentially taking years to finalize. Significant political will on both sides would be required.
Q: What alternatives are there to a full customs union?
A: A bespoke customs arrangement, similar to the one proposed by some Liberal Democrats, could offer a compromise. This would involve closer alignment with EU customs rules without full membership of the customs union. See our guide on Alternative Brexit Arrangements for more details.
What are your predictions for the future of UK-EU trade relations? Share your thoughts in the comments below!
