Rachel Reeves has had a busy start to her Chancellorship. Within the first 10 months, she has had a 40 billion Pound budget and watched in horror at the unprecedented upheaval of the last century of global trade. Trump’s uncertainty has ushered in a renewed vigour to look elsewhere for loyal partners and new, reliable investors. Or are they new? The Labour government was elected on a promise to “reset” relations with the EU, one of our longest and largest trading partners. The details of what this “reset” entails have now been negotiated and released, and the opinion of Economists is split. Will this be the panacea to Britain’s Economic woes?  

The Chancellor has made it very clear that growth is her highest priority, and there is strong evidence to suggest a return to European trade is the way to go. The contents of a trade deal with the EU contain the main areas of defence, agriculture, fishing, and youth mobility.  

The EU recently launched a 150 billion Euro scheme to fund defence contracts for the rearmament of Europe. Currently, the UK is excluded from this scheme, but the recent agreement has set the roadmap for its inclusion. When British firms are included in the fund, they would receive more orders, funded by Europe. This will improve their confidence in the future of their business and its balance sheet, encouraging them to invest, hire, and research more. This is precisely what the British economy needs, and if the Chancellor can agree to the inclusion of British firms into this scheme, it will be a huge step toward her goals of sustainable and long-term growth. However, the actual size of this growth would likely be limited as defence manufacturing makes up a small part of the British economy, and her time and energy may be better spent elsewhere.  

Agriculture and fishing have been constant sticking points between the UK and the EU, and the recent agreement has resulted in a trade-off between the two countries. The main problems for UK exporters to the EU are trade barriers and checks on goods at the border. This is especially problematic for farmers as there is a time pressure before the food goes off. The relaxation of barriers is a massive win for UK-EU trade, making it easier and cheaper for businesses to import and export goods. However, the government has had to make concessions for the fishing industry and has chosen to continue to allow EU fishermen to fish in UK waters to allow such a deal to go through. This is even worse for UK fishermen as fish stocks and their profits fall from overfishing. An industry that has declined for decades would receive another kick in the stomach. However, the Business Secretary is expected to outline a 350 million pound investment in the industry to limit the negatives of this and modernise the industry for the future. Moving forward, this may mean the UK has to adopt and follow EU law more closely to allow the easier export of goods, driving up costs for businesses and limiting the extent of the win. This is likely to be limited by the political backlash of aligning the UK so much with the EU, which will have played a large role in the Chancellor’s thinking. Still, she has chosen to prioritise her economic goals.  

A youth mobility scheme is proposed with EU 18-30 year olds living and studying throughout the UK, and UK 18-30 year olds being able to live and study in the EU. The previous Conservative government rejected this deal. However, if it were agreed upon, this would encourage more Europeans to study in the UK, as many universities have cited the difficulty of obtaining a visa as a large reason for the decline in the number of European graduates. This would boost UK Labour productivity as smarter, perhaps more motivated Europeans could work in the UK and improve growth as a result. However, this would cause a huge political backlash as many would fear a return to freedom of movement, the main reason for Brexit in the first place, and the details remain hazy.  

After years of uncertainty and added costs, businesses will benefit the most from a comprehensive and large deal. Such a deal should open the floodgates for investment and growth as uncertainties are clarified. But it is not so easy. Concessions like fishing and a possible change to regulations limit the extent of the benefits. Furthermore, many businesses will fear the effect of Trump’s tariffs and what he might do next, more than uncertainty with the EU, causing many firms to still withhold investments even after a deal. But a comprehensive and large UK-EU trade deal is the way for the Chancellor, some are suggesting it could give her around 10 billion pounds extra for further public investment and growth in the 1-2% region, smashing her goals and allowing for larger deals in the future but the devil remains in the details.