PM secures new agreement with the EU to support British business

The Prime Minister has confirmed a new agreement with the European Union, aimed to deliver on his core mission to grow the economy, back British jobs and put more money in people’s pockets.

Extensive negotiations over the last six months have led to the third major deal struck by the government in as many weeks, following the US and India – which the Prime Minister says will be “good for jobs, good for bills and good for our borders.”

As part of the deal, a new SPS agreement will make it easier for food and drink to be imported and exported by reducing the red tape that placed burdens on businesses and led to lengthy lorry queues at the border. This agreement will have no time limit, giving vital certainty to businesses.

Some routine checks on animal and plant products will be removed completely, allowing goods to flow freely again, including between Great Britain and Northern Ireland. Ultimately this could lower food prices and increase choice on supermarket shelves – meaning more money in people’s pockets.

Karen Betts, Chief Executive, The Food and Drink Federation (FDF) commented: “Trade with the EU is incredibly important to UK food and drink manufacturers. Europe is our single biggest customer, and most of the food and drink we import – from ingredients to finished products – comes from Europe too. However, trade in both directions has become complex and challenging. UK food and drink exports to Europe have fallen by a third since 2019 and businesses continue to face challenges and delays with imports.

“We’re pleased to see today’s announcement of a much closer UK-EU trading relationship, which acknowledges our shared high standards in food and drink. A high-quality agreement will have clear benefits for consumers and businesses. However, the government must continue to work closely with industry on the detail and ensure the UK is able to influence EU decision making where this impacts British businesses and competitiveness, particularly where the UK aligns with EU rules.”

The EU is the UK’s largest trading partner. After the 21% drop in exports and seven per cent drop in imports seen since Brexit, the UK will also be able to sell various products, such as burgers and sausages, back into the EU again, supporting these vital British industries.

Closer co-operation on emissions through linking respective Emissions Trading Systems will improve the UK’s energy security and avoid businesses being hit by the EU’s carbon tax due to come in next year – which would have sent £800m directly to the EU’s budget. The UK and EU will link their carbon markets to avoid taxes on carbon-intensive goods like steel and cement travelling between the UK and EU

Combined, the SPS and Emissions Trading Systems linking measures alone are set to add nearly £9bn to the UK economy by 2040, in a huge boost for growth.

British steel exports are protected from new EU rules and restrictive tariffs, through a bespoke arrangement for the UK that will save UK steel £25m per year.

Around 75% of UK steel exports are destined for the EU, a market worth nearly £3bn and the improved EU steel quotas will relate to arrangements in relation to the EU’s steel safeguards, which will ease export restrictions for steel angles and heavy sections.

Without linkage or the improved market access in place, UK producers faced the prospect of increased trade friction. EU importers would have had to pay CBAM levies and face tight safeguard quotas on UK steel products – costs that would likely be passed back to UK exporters or result in lost market share.

Gareth Stace, Director General at UK Steel, said: “UK Steel welcomes the formalised plan to link the UK and EU Emissions Trading Schemes and new, improved market access. This will be a significant step in reducing trade frictions in steel with the EU, our biggest export market, by ensuring equivalent carbon costs and easier exports. It also eliminates the risk of costs from the EU Carbon Border Adjustment Mechanism, where the burden particularly falls on SMEs.

“Crucially, linking the schemes lowers costs for the sector and provides long-term security, particularly if UK ETS prices were to exceed those in the EU in the years ahead, making linkage all the more important for competitiveness.”

Prime Minister Keir Starmer commented: “It’s time to look forward. To move on from the stale old debates and political fights to find common sense, practical solutions which get the best for the British people.

“We’re ready to work with partners if it means we can improve people’s lives here at home. So that’s what this deal is all about – facing out into the world once again, in the great tradition of this nation. Building the relationships we choose, with the partners we choose, and closing deals in the national interest. Because that is what independent, sovereign nations do.”

Today will also see the agreement of the new Security and Defence Partnership, which will pave the way for the UK defence industry to participate in the EU’s proposed new £150bn Security Action for Europe (SAFE) defence fund – supporting thousands of British jobs and boosting growth.

At a time of increasing global uncertainty and volatility, this will formalise UK-EU co-operation on defence to ensure Europe’s safety and security.

Commenting on this, Kevin Craven, CEO of ADS Group said: “The new Security and Defence Partnership, announced as work in progress in a No. 10 Press release, is a welcome development, although somewhat underwhelming in the lack of detail. While we are assured that this will pave the way for the UK defence industry to participate in the EU’s proposed new £150bn Security Action for Europe (SAFE) defence fund, and therefore support thousands of UK jobs, we are reluctant to celebrate too early when the specifics of such a deal remain to be seen.

“For UK defence and security, industrial cooperation is mission critical for more than 160,000 jobs, £10bn in exports, and nearly £40bn in value add to the UK economy. We cannot allow the catch of the day to take priority over the defence of the realm.”

Minister for European Union Relations and lead government negotiator, Nick Thomas-Symonds said: “Today is a historic day, marking the opening of a new chapter in our relationship with the EU that delivers for working people across the UK.

“Since the start of these negotiations, we have worked for a deal to make the British people safer, more secure and more prosperous. Our new UK-EU Strategic Partnership achieves all three objectives. It delivers on jobs, bills and borders. Today is a day of delivery. Britain is back on the world stage with a Government in the service of working people.”