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The Labour administration has been advised that forging a closer trade deal with the European Union is a "strategic necessity" for companies in Britain, as an increasing proportion of exporters report greater difficulty to do business under the existing post-Brexit trade deal.

Mounting Exporter Frustration with Current Deal

Calling on Labour to accelerate its EU relationship reset, the leading business group stated that the UK’s current TCA was not supporting them grow their sales in the EU. Over 50% of exporters in a poll of nearly one thousand firms – most of whom were small and medium-sized companies – said the trade deal negotiated by Boris Johnson’s government was not helping them.

“With a budget that failed to deliver substantial economic expansion or trade support, securing a successful EU reset is now a strategic necessity, not a matter of political preference,” said Steve Lynch.

Pointing to a continuing economic cost from Brexit, the trade body noted this figure represented a 13 percentage point increase from the proportion of dissatisfied companies in a similar survey a year earlier. It added that just four out of the 946 firms surveyed believed government support on trade policy changes was comprehensive.

Political Pressure for a Closer Partnership

This statement from the business group – which speaks for tens of thousands of companies – coincides with increasing awareness within Labour’s frontbench about the damage of Brexit. Recently, a senior Labour figure became the latest top Labour politician to call for a deeper trading relationship with the EU, in remarks interpreted as a suggestion that Britain could join a customs union.

This kind of proposal would clash with Labour’s manifesto, which promised “no going back” to the EU single market, customs union, or freedom of movement. Starmer has also stated in the past he could not foresee a situation where the UK re-entered the EU in his lifetime.

Nevertheless, several ministers favouring closer EU links are thought to be part of a group who would prefer the administration to take more ambitious steps.

Key Recommendations for the EU Negotiations

According to a document setting out a “business manifesto for the EU reset”, the business group said the government must focus its work to reduce barriers to trade for exporters to help boost the UK economy. Quoting frustrated survey respondents, it said firms were finding it increasingly difficult to navigate changes in EU and UK laws since Brexit.

“Our overseas sales since leaving the EU have virtually stopped. The TCA has had no impact in winning back any business into the EU,” said one small manufacturing firm in the North West.

The BCC outlined several main recommendations for negotiations with the EU in 2026, including:

• A deal to reduce inspections on agri-food goods.
• Finalising linkages between the UK and EU’s carbon markets.
• Establishing a scheme for young people to work and travel.
• Gaining British involvement in the EU’s defence fund.
• Improving collaboration on VAT and customs simplification.

A government spokesperson said: “We are removing red tape and trade barriers to boost employment, companies, and the economy. This is precisely the reason we reset our relationship with the EU and are making significant headway in negotiations.”