Rachel Reeves says closer UK and EU ties will boost economic growth

Closer relations between the UK and the European Union (EU) will boost economic growth, Chancellor Rachel Reeves will tell finance leaders on Monday.

In the first address by a British chancellor to the Eurogroup since Brexit, Reeves will say that a “reset” in relations would mean “breaking down barriers to trade” as well as helping “businesses sell in each other’s markets”.

While Labour has ruled out re-joining the trade bloc, it has repeatedly said it wants the UK to “deepen ties” with the EU.

The Conservatives said the chancellor should instead be working out how to reverse the “devastating Budget measures that have crashed confidence”.

The British Chambers of Commerce (BCC), which represents about 50,000 businesses, said that in order for the economy to grow “we must export more” but UK firms “are struggling under huge regulatory and paperwork burdens”.

At the Eurogroup finance ministers meeting in Brussels, Reeves will propose building a “mature, business-like relationship” between Britain and the EU.

“I know that the last few years have been fractious,” she will tell her European counterparts. “Division and chaos defined the last government’s approach to Europe. It will not define ours.”

She will say: “I believe that a closer economic relationship between the UK and the EU is not a zero-sum game. It’s about improving both our growth prospects.”

While this speech is not expected to result in any changes on Labour’s manifesto promise not to re-join the EU’s single market or customs union, it is likely to mean an agreement on food and farm exports, with the UK having said it is seeking a veterinary agreement.

It could also mean less red tape on more complex pan-European supply chains in manufacturing and textiles, but big trade-offs may be necessary.

The EU would like to see a scheme for young Europeans to live and work both there and in the UK – something Sir Keir Starmer has ruled out in the past.

Closer alignment to European food standards could also complicate any attempt by the UK to forge closer relations with the US on Donald Trump’s re-entry into the White House in January.

Ahead of the chancellor’s speech, shadow business secretary Andrew Griffith urged her to “jump on a plane to the US and talk to [President-elect] Trump about getting a US-UK trade deal done, not trying to take Britain backwards into the slow growth EU.”

But Liberal Democrat Treasury spokesperson Daisy Cooper said: “The Conservatives’ botched Brexit deal has been a disaster for the economy, with small businesses, farmers and fishers all caught up in endless red tape.”

Last month in a highly unusual move, the governor of the Bank of England, Andrew Bailey, said that the UK must “rebuild relations” with the EU.

The governor has avoided commenting on Brexit because of the Bank’s independence from Westminster politics.

“The impact on trade seems to be more in goods than services,” he said. “But it underlines why we must be alert to and welcome opportunities to rebuild relations while respecting that very important decision of the British people.”

The export of goods, such as in food and farming, has been impacted by new trade barriers. But services, including banking, have performed better than expected.

Labour has said it is committed to implementing post-Brexit agreements struck under the previous Tory government.

These include the Windsor Framework, which covers trade between the UK and Northern Ireland.

But Reeves will tell finance ministers: “The reset in relations is about doing what is the best interests of our shared economies and those that depend on it.

“That means breaking down barriers to trade, creating opportunities to invest and helping our businesses sell in each other’s markets.”

Reeves will give her speech at a key time for both the UK and European economies after President-elect Donald Trump threatened to impose tariffs of up to 20% on all goods imported into the US.

Carsten Brzeski, global head at financial services company ING Research, told the BBC’s Today programme that European leaders “clearly” had an interest in working more closely with the UK government as a result of Trump’s election.

He said that potential tariff changes could prove a “threat” to European economies such as Germany, who export a great deal of goods to the US.

“It’s also about Donald Trump’s idea to cut taxes and do deregulation in the US. That could also make the US economy much more attractive than the EU economy and could somewhat cannibalise the growth potential of Europe,” Mr Brzeski said.