Rachel Reeves has vowed to seize the “biggest prize” in global trade with a new push to build ties with the EU, as the UK chancellor prepares to pull back from a potential clash with Brussels over habitat rules.
Setting out plans for closer economic and security ties with the EU, Reeves on Wednesday heralded plans for an unwinding of Brexit, declaring: “The biggest prize is clearly with the EU. The truth is economic gravity is reality.”
Reeves said Britain was prepared to unilaterally align with Brussels’ rules to try to build trade with the bloc.
In a sign of the new approach, the chancellor is expected in the coming weeks to dial back calls from an official report to rip up certain habitat and wildlife rules in order to speed up infrastructure projects.
Reeves wants to avoid cutting red tape that predated Brexit, amid fears that undercutting Brussels’ habitat rules would cause a dispute with the EU and make it harder to move closer to the single market.
“It’s a question of what is the best thing for the economy in the round,” said one ally of the chancellor. “You just need to strike the right balance.”
After days of political turmoil at Westminster, Reeves and Prime Minister Sir Keir Starmer are trying to reassure business and Labour MPs that they will make a new push to reintegrate the UK with the EU economy.
Speaking at the London School of Economics at an event organised by the Brussels-based Bruegel think-tank, Reeves said: “There are three big economic blocs: US, China and Europe.
“We will always seek every opportunity to grow our economy and these trading relationships but ultimately only one of these is on our doorstep, and so the biggest prize is closer integration with Europe.”
Reeves has previously spoken about her willingness to align with EU rules in the hope of removing barriers to trade in established industries such as chemicals.
Although she has yet to say which other areas she would like to see covered by the new approach, Reeves has told colleagues that an EU-UK summit later this year should identify new workstreams.
She said at the LSE that the UK would examine ways of achieving further integration with the EU via further alignment at a sectoral level that could either be negotiated or unilateral.
Reeves said she was worried about countries building “mini-fortresses” and called for greater collaboration between nations with shared values. “I would like to build a bigger club of like-minded countries,” she said.
Starmer is also expected to make a pro-European speech this week, including covering new European defence co-operation, when he attends the Munich Security Conference, according to UK officials.
Starmer has said he wants Britain to join a second round of an EU defence fund, known as Safe, if the UK can negotiate a satisfactory entry fee. Joining the fund would allow UK defence groups to carry out 50 per cent of work on a collaborative project and lead it.
Reeves on Wednesday said she was frustrated that conversations with other European countries on defence co-operation had not progressed more rapidly. “The urgency on defence is unarguable,” she said.
This could mean working together to achieve better value for money in defence spending and engaging in further joint procurement and lower-cost lending in the defence arena, she said.
Reeves is pushing the EU not to penalise British companies with Brussels’ new “made in Europe” project, telling colleagues: “We are Europe too and need to be part of that. The EU doesn’t have the luxury of saying we can exclude countries that share our values.”
As part of the wider “reset” of relations that was set in train last year, Reeves is also pushing in government for what her allies call “an ambitious youth mobility scheme” to allow more young Europeans to work in Britain.
An early test of her EU drive will come when she responds to a government-commissioned report into cutting the red tape that has made Britain the “most expensive place in the world” to build a nuclear power station.
The nuclear regulatory task force was led by John Fingleton, former head of the Office of Fair Trading. He said in his final report: “By simplifying regulation, we can maintain or enhance safety standards while finally delivering nuclear capacity safely, quickly and affordably.”
The chancellor has been a big critic of rules that protect newts, bats and “micro-snails” at the expense of new homes and infrastructure. But Reeves’s allies said she was wary of any move that could hinder Britain’s future access to the single market.
Under the EU-UK post-Brexit Trade and Cooperation Agreement, both sides agreed not to cut their respective labour, social and environmental standards below their level in December 2020, in what were known as “non regression” rules.
Starmer spoke warmly of Fingleton’s report in December. The prime minister said he wanted to apply his call for deregulation to help the construction of nuclear power stations “across the entire industrial strategy”.
This month Valdis Dombrovskis, EU finance commissioner, said after meeting Reeves that the EU would have “an open mind” on British proposals to remove post-Brexit trade barriers.
Brussels was “open to discuss different areas as regards a single market”, he added.