Just before Christmas, the UK’s unemployment level hit 5.1%, the highest since the Covid lockdown year of 2021. Between September and November 2025, job vacancies fell by 9.6%. In real human terms that meant 77,000 fewer jobs. While UK inflation fell in December, it’s still 1.2% 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 (OBR) has not changed its view that Brexit has caused a minimum 4% economic contraction for the foreseeable future.
Add to Brexit the global instability created by Donald Trump’s upending of established global trading arrangements; Russian belligerence in Eastern Europe; a slowing Chinese economy; and an AI revolution causing declining graduate employment worldwide – and the immediate prospects for the UK’s public and private sector finances are not promising. For all these reasons, the Labour Government should take seriously the Liberal Democrats’ call for the UK to rejoin the European Union Customs Union (EUCU).
On 9 December, in the House of Commons, MPs voted for the Customs Union Bill (the Bill). It seeks to oblige the Government to enter talks about the UK re-entering the EUCU. The Bill, tabled by Liberal Democrats’ MP, Al Pinkerton, secured 100 votes for and 100 against. The deadlock was broken by the Deputy Speaker casting her vote for the Bill, which will have its second reading on Friday 16 January. Joining the EUCU is currently not Labour policy, but 14 Labour MPs voted with the LibDems, as did all the SNP’s MPs.
“Labour can’t out-Reform Reform”
In late December, Labour’s Secretary of State for Health, Wes Streeting, told The Observer, “We’re not going to win the next election by trying to out-Reform Reform.” He went on to say that the UK’s membership of the European Single Market and the Customs Union had brought “enormous benefits” to the UK. No 10 later said that the Government is sticking to its “red lines” of not rejoining the Single Market or EUCU.
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.”
The LibDems estimate that the UK would raise an additional £25bn in taxes from the uptick in business activity created by Britain going back into the EUCU.
Reform and the Conservatives, the engineers of Brexit, and the champions of the scorched earth policy that saw the UK quit all areas of EU cooperation, voted against the Bill. We don’t hear from either Tories or Reform that Brexit costs every British citizen over £1,300 a year, every year. That is: less money for families to spend; less tax collected by The Treasury, despite individuals’ taxes going up; less business activity and fewer jobs. It’s a vicious circle.
Boosting business confidence
Breaking out of a vicious circle is never easy, and rejoining the EUCU would not be a silver bullet. It would though greatly reduce costs and bureaucracy for British businesses and motivate more UK concerns to export into Europe. In a Europe hungry for positive news, seeing the UK back in the Customs Union would greatly boost business confidence. Since other EU countries also suffered from the re-erection of UK-EU trade barriers after Brexit, a return of the UK to the EUCU would be widely welcomed.
The European Union’s Customs Union has existed since 1968, so it pre-dates the UK’s membership of the European Economic Community, the predecessor of the EU. The EUCU creates a single tariff area for all goods imported from outside the EU, thus allowing goods to move freely across borders within the Customs Union.
The members of the Customs Union – the EU member states plus Turkey, Andorra and San Marino – use a common set of customs rules. In 1999, Turkey joined the EUCU, despite being neither a member of the EU nor part of the EU’s single market.
Clear advantages of Custom Union membership
The Customs Union makes it easier and cheaper for businesses to trade. It facilitates governments protecting citizens and the environment by checking for harmful or hazardous goods at external entry points, enforcing veterinary and sanitary standards to control the spread of animal and plant diseases. It makes trade more efficient, cuts bureaucratic delays and upholds standards on health, environment and product safety. It is the global gold standard in trade flow management.
According to the UK’s Food and Drinks Federation (FDF), UK exports of food and drink have declined by 12.6% in recent years, a bigger fall than any recorded in other European countries. “Demonstrating that the UK’s challenges aren’t part of a global trend, but rather unique to the UK’s post-Brexit circumstances”, says the FDF.
Across British business, large exporting companies absorbed the extra cost of trading post-Brexit. Smaller concerns, or those with only a fraction of their trade overseas, simply threw in the towel or looked to expand market share domestically. The collective impact of this was a massive fall in trade volumes with the EU. UK trade with non-EU states has also fallen.
Minimal political risk for Labour
Rejoining the EUCU comes at minimal domestic political risk to Labour. Unlike the European Single Market, the EUCU is only about the movement of goods and the application of sensible rules in areas like food hygiene. Being in the EUCU has nothing to do with the free movement of people, so there is no possibility of increased immigration from the EU.
It is 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 16 January.
A shorter version of this article was first published in Scotland on Sunday on 4 January 2026.
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