25 billion reasons why the UK should rejoin the European Customs Union
Given the state of the UK economy, Labour cannot afford to shun the estimated £25 billion in extra tax revenues that rejoining the Customs Union would bring
Just before Christmas, the UK’s unemployment level hit 5.1 per cent, the highest since 2021 and the Covid lockdown. Between September and November, vacancies fell by 9.6 per cent. In real human terms that meant 77,000 fewer jobs.
UK inflation fell in December, though it’s still 1.2 per cent above the Bank of England’s target and higher than in the Eurozone. There was no discernible growth in the UK economy in the dying months of 2025.
Underpinning Britain’s economic flatlining is Brexit. The Office for Budget Responsibility has not changed its view that Brexit caused a minimum 4 per cent economic contraction for the foreseeable future. Add to Brexit the current instability in global geopolitics and trade, and the immediate prospects for the UK’s public and private sector finances are not promising.
Labour’s Holy Grail
On December 9, MPs voted for a Liberal Democrat Bill that would oblige the government to start talks about the UK re-entering the European Union Customs Union (EUCU). Joining the EUCU is currently not Labour policy, but 14 Labour MPs voted with the Lib Dems, as did all the SNP’s MPs. The Bill will have its second reading on January 16.
There are many reasons why the Labour government should take the call to rejoin the EUCU seriously. For Labour, economic growth is the Holy Grail. It has staked its future on growth.
In a British Chamber of Commerce report last month, Sir David Liddington wrote: “For as far ahead as we can see, the European Union will remain by far our most important trading partner.”
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In late December, Labour’s Health Secretary, Wes Streeting, told The Observer that the UK’s membership of the European Single Market and EUCU had brought “enormous benefits” to the UK. No 10 later said the government is sticking to its “red lines” of not rejoining the Single Market or EUCU.
The Lib Dems estimate that the UK would raise an additional £25 billion in taxes from the uptick in business activity created by Britain going back into the EUCU.
Minimal political risk
Reform and the Conservatives, the engineers of the scorched earth policy that saw the UK quit all areas of EU cooperation, predicably voted against the Bill. We don’t hear from Tories or Reform that Brexit costs every British citizen over £1,300 a year, every year. That’s less money for families, less tax collected by government, taxes going up, less business activity and fewer jobs.
The EUCU creates a single tariff area for all goods imported from outside the EU, making trade faster, easier and cheaper. Its gold standard set of rules helps police borders against unsafe food and goods. Three non-EU states are members.
Rejoining the EUCU would come at minimum domestic political risk to Labour. As it has nothing to do with the free movement of people, there is no possibility of increased immigration from the EU.
It’s wholly to the UK’s advantage for the government to begin talks with the EU on embracing the Customs Union. All Scottish MPs should vote Aye on January 16.
Sir Graham Watson is a former leader of the Liberal Group in the European Parliament. Martin Roche had a 35-year career in international public relations and is a writer. Both are on the national committee of the European Movement in Scotland.
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