Fact Check: Assessing the Feasibility of a Custom EU-UK Customs Union

Brexit Debate Reignites as Liberal Democrats Push for UK-EU Customs Union

The Brexit debate has returned to the forefront of British politics after more than 100 MPs backed a bill proposed by the centrist Liberal Democrats calling for a bespoke UK-EU customs union. The proposal aims to reduce bureaucracy and trade barriers between the European Union and the United Kingdom by aligning customs procedures.

Despite gaining support from a dozen members of the ruling Labour Party, the bill faces significant hurdles. Without government backing, it stands little chance of becoming law. Prime Minister Keir Starmer has explicitly ruled out re-entering a customs union, arguing such a move would “unravel” existing trade agreements the UK has established with countries like the United States since Brexit.

The UK formally departed the EU’s customs union and single market at the end of December 2020 with the signing of the Trade and Cooperation Agreement, more than four years after the 2016 Brexit referendum. Under current arrangements, goods moving between the EU and UK qualify for zero tariffs if they meet rules of origin criteria, requiring components to be primarily sourced from either region. However, substantial regulatory and customs checks remain in place, though some have been unilaterally suspended.

Liberal Democrat MP Al Pinkerton, who introduced the bill on Tuesday, believes his proposal addresses critical challenges facing British businesses. “British businesses are begging for this,” Pinkerton told Euronews. “Two billion pieces of paperwork have been added since 2021, that’s adding millions of pounds worth of costs to British businesses.”

Pinkerton noted that feedback from European businesses has been “hugely positive,” as they too face increased costs from post-Brexit border checks. His bill aims to “compel the government to start a process of negotiation” on a tailored agreement with Brussels.

“I struck a match, and it cast a little bit of light, and it shed a little bit of heat,” Pinkerton said. “But the truth is that it will only go anywhere if something else catches light as a consequence.”

Economic experts remain divided on the potential benefits of a new customs union. The Liberal Democrats claim their proposal would boost UK GDP by 2.2%, generating an additional £25 billion (€28.5 billion) in tax revenue, though they acknowledge this figure is an estimate based on a framework yet to be negotiated.

Jonathan Portes, economics professor at King’s College London and senior fellow at UK in a Changing Europe, described the £25 billion projection as “not completely unreasonable” since it aligns with pre-Brexit modeling that predicted leaving the customs union would cost the UK “in the region of one percent of GDP.” However, Portes cautioned that the proposal “assumes that we could negotiate a customs union that was broadly favorable to us and relatively easily,” which he characterized as “fantasy.”

If the UK pursued an arrangement similar to the EU-Turkey customs union, which eliminates tariffs on most industrial goods and removes customs duties, the outcomes would be mixed. Turkey must align with EU rules but doesn’t automatically benefit from EU free trade agreements. Under such a scenario, goods could move between territories without customs restrictions, though sectors like agriculture might remain excluded.

Portes warned that such an arrangement could trigger political backlash in Britain. “For the UK, accepting that we are a significant but third country, that we’re maybe significant in the EU but we have to follow their rules for most things, is likely not going to be politically acceptable,” he said.

Fabian Zuleeg, chief executive of the European Policy Centre, suggested that while a customs union could help, EU-UK trade is already highly integrated. “We don’t really have the kind of internal barriers which will make the customs union really that effective,” Zuleeg told Euronews. He added that while the EU would see some benefits, the UK would gain more, potentially limiting Brussels’ enthusiasm for such an agreement.

The EU’s receptiveness to a new customs arrangement remains uncertain. During Brexit negotiations between 2017 and 2019, EU officials repeatedly insisted that the UK could not “cherry-pick” favorable conditions unavailable to other non-member states.

However, relations have improved since Labour took power. German MEP René Repasi noted, “The Starmer administration is much more serious, and that, of course, has had a positive impact on the EU side, that they see a government on the UK side that they can have serious negotiations with.”

Repasi believes the EU remains open to pathways toward full UK reintegration but cautioned that “special status is hard to justify” and any agreement “would depend on the details.”

As part of Starmer’s efforts to strengthen EU ties after years of strained relations under Conservative governments, a UK-EU reset meeting in May committed to various initiatives, including a phytosanitary agreement to reduce checks on food products, indicating some progress in repairing the relationship.