The Economic Case for Closer UK-EU Ties

The hard numbers

Since Brexit, the UK has been trading with its largest partner — the EU, which accounts for 42% of UK exports — under the Trade and Cooperation Agreement. While this avoids tariffs on goods, it reintroduced extensive non-tariff barriers: customs checks, rules of origin requirements, regulatory divergence, and the end of mutual recognition of services.

The consequences are measurable:

• UK goods exports to the EU fell by 16% in 2021 compared to pre-Brexit trends (Centre for European Reform)
• Foreign direct investment into the UK has underperformed peer economies by an estimated £29bn/year since 2016 (UK in a Changing Europe, 2025)
• UK financial services — the country’s largest export sector — lost automatic EU market access (“passporting”), with 7,000 financial sector jobs and £1.3tn in assets moved to Paris, Dublin, Luxembourg, and Amsterdam
• UK productivity growth has lagged EU27 average by 0.4 percentage points per year since 2020, compounding over time

What rejoining the single market would deliver

Rejoining the European single market — even without full EU membership, as Norway demonstrates — would restore frictionless trade in goods, mutual recognition of services, and common regulatory frameworks that UK businesses no longer need to duplicate.

The Centre for European Reform estimates that UK GDP is currently 5.5% lower than it would have been if the UK had voted to remain. Restoring single market membership would claw back a substantial share of this gap over the following decade.

Key gains:

1. Eliminated customs friction — The UK-EU border currently generates 85,000 export health certificates per week. Single market membership eliminates these entirely.
2. Services market access — UK lawyers, architects, accountants, and financial firms would regain the right to operate across the EU without reapplying for each jurisdiction.
3. Supply chain normalisation — Just-in-time manufacturing (automotive, aerospace, pharma) relies on frictionless cross-border components. UK manufacturers lost this in 2021.
4. Investment attraction — A stable, predictable EU-aligned regulatory environment is a major factor for multinational inward investment decisions.

What the Switzerland Plus model offers

Switzerland has bilateral agreements with the EU that give it single market access in specific sectors — goods, land transport, air transport, free movement of persons, and others. The UK could pursue a similar or enhanced arrangement — the “Switzerland Plus” deal — that Andy Burnham has advocated for, adding agricultural products and broader services access.

Switzerland’s per-capita income exceeds the UK’s, its unemployment rate is half of the UK’s, and it runs a trade surplus with the EU — demonstrating that close EU ties without full membership can be economically superior to distance.

The cost of inaction

The OECD projected in 2016 that Brexit would reduce UK income by 2.7–7.7% by 2030. The Bank of England’s 2023 assessment confirmed the UK economy was materially smaller than it would otherwise have been. Every year of delay in restoring closer ties compounds this cost.

The economic case is not about revisiting past decisions — it is about making rational choices for the future based on evidence.

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Sources: Centre for European Reform, UK in a Changing Europe, ONS Trade Statistics, Bank of England, OECD Economic Outlook