How to strengthen UK-EU relations: Policy Priorities for the Summit

Summary

The UK-EU Summit on Monday 19 May 2025 is a pivotal moment in the UK-EU relationship.¹ It is the first opportunity to set out a renewed strategic alliance between the UK and Europe, that stretches beyond the existing Trade and Cooperation Agreement (TCA).

The Government has described raising growth as its number one mission and has a target for the UK to achieve the highest rate of sustained growth in the G7, before the end of this Parliament. Current forecasts suggest that the UK is not on course to reach this target.² When asked about the IMF’s forecasts, the Secretary of State told the Committee in November 2024 that “it is absolutely the commitment of this Government to outperform all of those forecasts, based on the combination of measures that we are committed to.”³ This was echoed by the Prime Minister when he appeared before the Liaison Committee in December.⁴ Equally, the nations of the European Union face great challenges to growth, and are now considering an ambitious agenda to improve competitiveness that in part rests on removing barriers to greater trade.⁵

A smoother trading relationship with our closest neighbour would help our economy grow faster. The future of this trading relationship with Europe, however, is limited by the red lines set by the Government: no return to free movement, and no membership of the single market or customs union. The Secretary of State acknowledged to this Committee that the Government’s priorities “will not be the same as being a member of the European Union. We just have to be frank about that.”⁶

The world has fundamentally shifted since the Trade and Cooperation Agreement was signed on 30 December 2020. The full-scale Russian invasion of Ukraine in February 2022 has sharpened the need to increase defence spending and coordinate defence industrial strategy. China’s accelerating military build-up has heightened concerns about the security of our supply chains. Notwithstanding the UK-US deal announced on 8 May 2025, the re-election of President Trump has brought new tariffs and the risk of US withdrawal from key aspects of the multilateral system which the United States helped build after World War 2. These shifting dynamics reinforce the need for deeper strategic cooperation with the EU and European NATO allies.

Despite this context, the Government has not published a Green Paper ahead of the summit between the Prime Minister and President von der Leyen to stimulate debate and gather wide stakeholder input. The Minister for EU relations, Nick Thomas-Symonds told this Committee “I am not proposing to publish a road map [as] our position is set out in our manifesto”.⁷ We believe that a detailed statement from Government would have been helpful and so, the Business and Trade Committee has sought to fill the gap and publish 20 policy options which we believe should form the trade core of the UK-EU Reset.

This final report consolidates the twenty proposals we table under three broad headings:

• Defending Our Prosperity: Strengthening UK-EU cooperation in defence industries, intelligence-sharing, and critical infrastructure protection, including continued support for Ukraine in its defence against aggression.
• Energy Cooperation: Cutting the cost of the transition to Net Zero, by deepening electricity market integration, aligning carbon border policies, and accelerating joint investment in clean energy to ensure long-term energy security, sustainability, and lower energy costs.
• Smoothing Trade: Minimising trade friction through SPS agreements, wider customs process simplifications, regulatory cooperation, and sector-specific trade facilitation measures to support businesses and economic growth.

Delivering this agenda will not be easy. But it will deliver faster growth in our economy. So the Government must not shy away from difficult decisions and trade-offs, but instead confront them with a clear strategy, ensuring that the UK-EU reset delivers tangible benefits for businesses, workers, and consumers.

Introduction

1. On 15 January 2025, we launched our inquiry on export-led growth, aiming to identify policies and priorities to boost trade, support UK exporters and grow our economy faster.⁸ Our first priority was to propose measures for the reset in UK-EU trade relations.

2. To deliver this work we undertook five steps:

a. We visited Brussels and the World Trade Organisation in late January 2025, engaging with trade experts, industry representatives, European Parliament colleagues, and HM Government officials to gain insights into the key trade-related issues.

b. On 4 April 2025, we published our draft ‘Green Paper’ report “How to strengthen UK-EU relations”. The unusual step to publish our Green Paper report allowed further consultation with business, trade unions and consumer groups.

c. The Committee shared our Green Paper report with stakeholders met in Brussels. In particular, we would like to thank Sandro Gozi MEP, the Co-Chair of the EU-UK Parliamentary Partnership Assembly, for his positive response.

d. To facilitate comprehensive stakeholder engagement, the Committee launched a public consultation on this draft to gather feedback on the proposed recommendations. We received 75 submissions from a wide range of stakeholders, including industry bodies, trade unions, and other organisations.

e. On 6 May 2025, the Committee conducted a visit to Northern Ireland to examine the practical implications of the current UK-EU relationship, and to understand the operation of the Windsor Framework. The visit provided an opportunity to hear directly from businesses, officials, and community representatives regarding the specific challenges and opportunities associated with Northern Ireland’s unique status within both the UK and EU markets. A further description of the Committee’s visit is provided at Annex 1.

3. This final report consolidates the evidence we have gathered and presents our final recommendations. The Committee would like to thank all who contributed their time and expertise to support development of this report over the last five months.

Securing Prosperity

4. The Committee’s draft ‘Green Paper’ set out five recommendations to enhance the UK’s long-term economic resilience through closer cooperation with the EU in defence industrial policy, protecting critical infrastructure, economic security, and international governance. We reaffirm our original analysis and recommendations, which we present here alongside fresh evidence and stakeholder perspectives to provide an assessment of the security aspects of the UK’s trade relationship with the EU.

5. Our consultation revealed that approximately 90% of respondents saying they “strongly agree” or “agree” with our recommendations to defend our prosperity.

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Figure 1: Support for Recommendations on “Securing Prosperity”

Source: Confidential Stakeholder Survey, Business and Trade Committee (2025)

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A shared defence industrial policy

6. Ensuring the security of citizens is the foremost duty of any Government. The UK must stand resolutely with Ukraine in the face of an existential threat to its sovereignty and European stability. The Prime Minister has made clear that the UK “must now change our approach to national security so [the UK is] ready to meet the challenges of our volatile world.”⁹ In response, the UK has committed to increased defence spending and is working urgently to build a ‘coalition of the willing’ to provide concrete security guarantees for Ukraine and uphold European stability.¹⁰ In a recent speech, the President of the European Commission, Ursula von der Leyen, outlined four priorities for European security: increased defence spending, pan-European cooperation to address gaps in priority areas, increasing support for Ukraine and strengthening Europe’s defensive industrial base. In addition, the President stated the EU “was working to break new ground on security with the United Kingdom and other partners within Europe, in our neighbourhood or within the G7”.¹¹

7. Forecasts of the increase in Euro-NATO defence spending remain speculative. But indications are that it will increase significantly between now and 2030. A substantial portion of this will be spent on equipment.¹² Moreover, the lessons from the battlefield in Ukraine point to the absolute criticality of integrating the defence industrial base, and its innovative capabilities, into war-fighting capability.

8. To maximise defence spending efficiency across Euro-NATO partners, we have heard that the UK and Europe should deepen defence industrial cooperation. In written evidence to this Committee, the ADS Group, the trade organisation representing the UK aerospace, defence, security and space industries, stated they “would welcome steps towards improved trading arrangements with the EU, which should include a strategic agreement with the EU on defence and security.”¹³

9. Since the publication of our draft “Green Paper” report, we were pleased to see reports of progress towards a Security and Defence Partnership between the UK and EU.¹⁴ We note that a further, supplementary agreement would be necessary after this Partnership is signed to enable UK participation in the EU’s planned €150 billion (£127 billion) “SAFE” defence industry investment programme, put forward by the European Commission in March.¹⁵ Further engagement from the Government will also be necessary to secure a meaningful UK role in the EU’s other defence industrial initiatives under its 2028–2034 long-term budget. The Committee will monitor further progress with interest.

A plan to safeguard Critical National Infrastructure

11. A new and significant emerging threat is the risk of attacks on shared Critical National Infrastructure. Key vulnerabilities include submarine data cables, such as the transatlantic cables that land on the Irish continental shelf, power lines and offshore and onshore energy and data infrastructure, including wind turbines. The European Commission’s 2025 Action Plan on Cable Security acknowledges this challenge, committing the EU to “cooperate in promoting the development of secure, trusted, and resilient submarine cable infrastructures with neighbouring countries, strategic partners, other third countries, and in multilateral and multistakeholder fora.”¹⁶ The UK’s military capabilities, not least the anti-submarine warfare capabilities of the Royal Navy and Royal Air Force, play a significant role in monitoring and deterring threats to these assets.¹⁷ Enhancing coordination in monitoring and deterring threats to these critical assets should therefore be a priority, with special reference to Ireland, whose waters contain much critical subsea infrastructure.

Enhancing economic security

13. The UK and EU share common economic security challenges, such as supply chain vulnerabilities, geopolitical instability, and unfair market distortions. While the UK-EU Trade and Cooperation Agreement (TCA) lacks a formal economic security dialogue, the Foreign Secretary has previously proposed a structured mechanism as part of the ‘reset’ package.¹⁸ The European Commission’s Economic Security Strategy also calls for intensifying engagement with third countries, presenting an opportunity for structured UK-EU coordination on issues such as supply chain resilience, competition policy, and global trade governance.¹⁹ Our consultation revealed support for this.

14. For example, Buckinghamshire Business First were “highly supportive of cooperation on anti-dumping policies, given that the small business community in Buckinghamshire could be particularly exposed to competition from commodity dumping.”²⁰

Economic Crime Cooperation

16. Both the UK and EU recognise the value of working together on tackling cross-border criminal activity, including economic crime. The Trade and Cooperation Agreement already include extensive provisions on UK-Europol cooperation,²¹ as well as exchange of crucial data on DNA, fingerprints and vehicle registrations based on the EU ‘Prüm’ system.²² There is also a mechanism for exchange of information on beneficial ownership of assets to counter money-laundering.²³

17. There is scope to go further. The Government rightly has a focus within its “safety” pillar of the reset on seeking reinforced cooperation with EU partners on addressing organised crime, through improved intelligence sharing mechanisms and operational collaboration. This would be a win-win, improving the safety of citizens on both sides and supporting the fight against fraud and money-laundering. We recognise the importance in this context of an extension of the EU’s data adequacy decision for the UK under its Law Enforcement Directive beyond 2025.

Supporting international institutions

19. The UK sees the WTO as a central element of a multilateral free trading system that secures stability and predictability.²⁴ The WTO, however, has faced challenges triggered by changes in the global economy and geopolitical context. In 2016, the US began blocking appointments to the WTO Appellate Body, the third stage of the WTO dispute settlement system, arguing that it was overreaching its original mandate.²⁵

20. In response to the paralysis of the WTO Appellate Body, a group of WTO members, including the European Union, established the Multi-Party Interim Appeal Arbitration Arrangement (MPIA) as a temporary mechanism to preserve dispute resolution. While the UK has not joined the MPIA, it continues to support efforts to restore a fully functioning dispute settlement system at the WTO. We should now go further - and stakeholders agree. The Society for Motor Manufacturers and Traders for example, told this inquiry:

The UK Government should also consider joining initiatives aimed at preserving an effective rules-based system and seek to include as many counties as possible. One of these initiatives could be joining the Multi-Party Interim Appeal Arbitration Arrangement (MPIA).²⁶

Prosperity in Goods

22. Since 1 January 2021, trade between the UK and the EU has been governed by the TCA, as the UK departed from the Single Market and Customs Union.²⁷ The TCA provides that there will be no tariffs or quotas imposed on goods traded between the two territories which meet the Agreement’s rules of origin requirements.

23. Growth in the value of UK goods exports to the world has, in recent years, been sluggish. Since 2019, UK global exports rose by just 0.3 per cent each year, far below goods export growth across the OECD of 4.2 per cent annually over the same period.²⁸ In 2024, the UK’s exports of goods to the EU were valued at £346.1 billion, representing 41% of all UK goods exports.²⁹ But despite the comprehensive nature of the TCA, evidence submitted to this inquiry suggests that non-tariff measures (NTMs) – particularly Sanitary and Phytosanitary (SPS) and Technical Barriers to Trade (TBT) – hurt UK goods trade performance.³⁰

24. The Committee’s draft “Green Paper” report set out seven recommendations to improve the flow of goods across borders, including; establishing a sanitary and phytosanitary (SPS) agreement, strengthening fisheries cooperation, three ways to reduce customs and border formalities, rejoining the Pan-Euro-Mediterranean Convention on rules of origin, and improving regulatory dialogue. Stakeholder consultation revealed strong or very strong support for these ideas, with support highest for maximising compatible regulation, cutting red tape at the border and securing an ambitious SPS agreement.

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Figure 2: Support for Recommendation on “Prosperity in Goods”

Source: Confidential Stakeholder Survey, Business and Trade Committee (2025)

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Implementation of the Windsor Framework in Northern Ireland

25. Our draft “Green Paper” originally did not make specific recommendation on the Windsor Framework. However, during our visit to Northern Ireland, we heard that the joint UK-EU shared commitment to the full, timely, and faithful implementation of the Withdrawal Agreement is vital to the broader goal of securing long-term prosperity through stable UK-EU relations. The Committee therefore welcomes the recent update from the Withdrawal Agreement Joint Committee, led by the Minister for the Cabinet Office, the Rt Hon Nick Thomas-Symonds MP, and European Commissioner Maroš Šefčovič. In this update, the Chairs noted the considerable progress made in implementing the Windsor Framework, including progress in agri-foods, trade, VAT and excise, and stakeholder engagement.³¹ Further evidence that we heard in Northern Ireland is outlined in Box 1.

Box 1: Northern Ireland: Trust, clarity, and the Windsor Framework

An ambitious Sanitary and Phytosanitary (SPS) agreement

27. One of the Labour Party’s manifesto commitments was to negotiate a Sanitary and Phytosanitary (SPS) Agreement with the EU to remove newly introduced checks on agri-food goods, plants and live animals.³² A study by Aston University found that a high-alignment legally enforceable SPS agreement could increase UK exports of food and plants by 22.5 per cent.³³

28. Details of what the Government is seeking are unclear. What is clear is that the degree to which SPS agreements remove border requirements are proportional to the regulatory alignment achieved.³⁴ When appearing before the Committee, the Minister for EU relations recognised previous precedents such as the agreements that New Zealand and Switzerland have with the EU, but told us that the Government will be looking for a bespoke agreement and their starting point is a “position of wanting to promote the highest of standards”.³⁵ In addition, during our visit to Brussels, we heard that negotiating such an arrangement would likely be a more time-consuming undertaking than is widely understood. The difficulties are exemplified by the impasse over UK-EU trade in seed potatoes, which have been halted by lack of a mutually agreeable SPS deal.³⁶

29. Stakeholders strongly supported an ambitious SPS agreement. For example:

a. The West London Chambers of Commerce advocated for simplifications to export and import declarations, including veterinary certificates.³⁷

b. The Agricultural Industries Confederation stated: “An SPS veterinary agreement has the biggest potential to positively impact UK agricultural supply chains businesses. The current volume of non-tariff barriers to trade cannot be overstated, whether for GB to EU or GB to NI.”³⁸

c. The International Meat Trade Association told us: “We strongly support the [Green Paper] report’s vision for a ‘Sanitary and Phytosanitary (SPS) agreement with the EU to reduce the need for regulatory formalities and controls at the border for agri-food products. We welcome that IMTA’s position on an SPS agreement is cited in the [Green Paper] report, however we feel the report’s recommendation on this point does not sufficiently recognise the benefits of the UK having a regulatory regime which is independent of the EU. The focus on regulatory alignment does not take into account the positive changes the UK has been able to make, for instance moving to a more pragmatic and risk-based Rest of World import regime. The UK maintaining regulatory independence is vital so that the UK can regulate in its own interest, for both its citizens and businesses.”³⁹

30. An ambitious SPS agreement will reduce trade barriers and strengthening food supply chain resilience. Acknowledging stakeholder concerns for maintaining regulatory independence, and taking cognisance of any EU agreement on alignment potentially impacting on Rest of World FTAs, we recommend:

From competition to cooperation on fisheries

32. The fruits of the sea around our shores are a part of our shared ecology, and like any commons must be managed carefully to protect the livelihoods of future generations. Under the TCA, 25% of the overall existing EU quota in UK waters is to be transferred to the UK over a five-and-a-half-year period to 30 June 2026, with percentage changes agreed for the total allowable catch (TAC) for each fish stock in each fishing area. Mutual access to each other’s waters is now through a licensing system for individual fishing vessels.

33. Without further policy changes, after 2026 negotiations on access and share of stocks will take place on an annual basis, although provisions exist for multiannual agreements.⁴⁰ However, on 21 January 2025, the Minister for EU relations told us: “As the trade and cooperation agreement stands at the moment, it would move into some sort of annual negotiations. I do think that having something that is more stable would be in our interests, going forward”⁴¹

34. According to the ONS, in 2021, the fishing industry represented 0.03% of the UK’s economic output, and around 5% of the broader agriculture, forestry and fishing sector.⁴² Salmon Scotland told us that in 2024, exports of Scottish salmon to France alone were worth £462 million.⁴³ These numbers do not, however, capture the reality that many fragile coastal communities are heavily reliant on fishing, both its at-sea component and the less visible onshore processing jobs. It is obvious the EU has eyes on the valuable resources in our pristine waters and the Government must not regard these as a mere bargaining chip, but do its utmost to safeguard their future.

35. A majority of respondents (63%) said they “strongly agree” or “agree” with the Committee’s recommendation on fisheries but the level of support was more qualified for this recommendation than for others. No further qualitative evidence was received during the consultation. The Committee will continue to monitor developments, including industry commentary and media reporting and stands by its recommendation, set out below.

Cutting maximum red tape at the border

37. The European Commission and the UK Government are reforming the operation of their customs and regulatory regimes for goods crossing the border.⁴⁴ Both within and outside of the TCA, there are opportunities which, if used to their full potential, could reduce friction at the border for economic operators from the EU and UK.⁴⁵

38. The Committee’s draft “Green Paper” made three recommendations to reduce administrative burdens and simplify customs processes at the UK-EU border:

• Trusted Trader Schemes: Mutual recognition between the UK and EU of respective trusted trader “Authorised Economic Operator” (AEO) schemes for customs simplifications, in addition to the existing mutual recognition of the UK and EU AEO schemes for security and safety purposes.⁴⁶
• Negotiating a bilateral waiver on the need for traders to submit safety and security declarations on goods moved between Great Britain and the EU, as Norway and Switzerland have done.⁴⁷
• Cooperation to facilitate roll-on, roll-off cargo traffic, particularly across the Channel, as envisaged by the Trade and Cooperation Agreement⁴⁸

39. Industry has told the Committee that customs facilitation is important. Our proposals received strong endorsement, with 85% of stakeholders expressing strong agreement for each.

40. Many stakeholders went on to add evidence to our conclusions;

a. The Food and Drink Federation (FDF) told the Committee that “unilaterally, the UK can modernise border systems through reviewing the decision to suspend the development of the Single Trade Window, delivering on the SPS trusted trader schemes outlined in the BTOM, and creating a permissive import regime for the import of product samples. In the long term, these can become interoperable with similar EU schemes.”⁴⁹

b. The Society of Motor Manufacturers and Traders (SMMT) also supported similar recommendations regarding enhanced cooperation on border management and alignment of single trader windows.⁵⁰

c. The International Meat Trade Association also told the Committee that they “support the comments of Food and Drink Federation (FDF) cited in the [previous] report regarding the Single Trade Window, Trusted Trader Schemes and product samples import regime.”⁵¹

d. The Wine and Spirit Trade Association also felt that “restoring funding and committing to the implementation of the Single Trade Window should be a priority for Government”⁵² along with other recommendations for their sector:

• “PDO/PGI wines should not be required to present additional evidence beyond proof that they have been certified as PDO/PGI,”
• extending excise and customs duty exemptions to alcohol samples used for commercial purposes and exempting organic wines from needing a Certificate of Inspection, relying instead on general food labelling law; and
• providing clearer due diligence requirements for importers.

41. The Committee is grateful for the strong support received for its recommendations to cut red tape at the border, and welcomes the additional examples provided through the consultation. These submissions highlight the real-world impact of regulatory burdens and reinforce the case for action. If meaningful progress is not achieved in reducing customs burdens with the EU, the Committee will closely examine the UK Government’s unilateral steps, including the development of the Single Trader Window.

42. The Committee reiterates its advice to ministers and recommends regular consultation with industry to remove sectoral burdens at the border wherever possible.

Rejoining the Pan-Euro-Med Convention

44. Rules of origin are the rules which determine in which country a product was sourced or made - i.e. its ‘economic nationality’. Only if a product is ‘made’ in the UK (or the other Party, for example the EU), as defined by rules of origin, can it receive lower tariffs through each free trade agreement.⁵³ The UK and the EU have agreed to a set of rules of origin under the TCA.⁵⁴ In written evidence to this inquiry, stakeholders such as luxury goods trade association Walpole and chemicals producer Dow suggested however that the UK should rejoin the Pan-Euro-Mediterranean (PEM) Convention on rules of origin (which the UK left when it left the EU) to enhance flexibility and facilitate trade for businesses operating across multiple markets (see Box 2).⁵⁵

Box 2: Pan-Euro-Mediterranean (PEM) Convention Rules of Origin

45. Rejoining PEM, and thus its expanded cumulation provisions, could help UK exporters by making it easier to meet rules of origin requirements and thus avoid tariffs when trading with both the EU and other PEM countries. However, the Committee notes this would be a significant change for both UK and European traders in an already turbulent trade environment, and would not reduce the amount or cost of paperwork required to import or export goods.⁵⁶

46. Our draft “Green Paper” noted the particular rules of origin designed in the TCA for electric vehicles. The Committee would like to thank the Society of Motor Manufacturers and Traders (SMMT) for its detailed feedback and engagement on the TCA rules of origin and the Pan-Euro-Mediterranean (PEM) Convention.⁵⁷ SMMT reiterated its position that the Government should consult with the UK manufacturing sector before rejoining the PEM Convention, emphasising the importance of using the Convention as an additional compliance route alongside the Trade and Cooperation Agreement (TCA).

47. Indeed, through our consultation, SMMT told the Committee that one of their key concerns in the EU reset is to:

“Ensure tariffs are avoided on electrified vehicles (EVs) under any circumstances. The UK and EU need to urgently monitor expected compliance rates with 2027 origin rules to assess potential exposure to tariff risks. The two sides should explore all available options to preserve a tariff-free European EV market and encourage further inward investment. In the event of a potential risk, the two sides should adopt a mutually agreed solution to avoid tariffs and preserve a prosperous European market for EVs which helps deliver shared UK and EU climate goals and healthy new car market, which in turn supports our collective industrial and manufacturing base.”⁵⁸

48. The Committee enlarges its recommendation to include a request that Government conducts a formal consultation with industry on the UK potentially rejoining the Pan-Euro-Mediterranean Convention. We note that in a written answer of 4 February 2025 the Minister for Trade Policy and Economic Security stated: “We do not currently have plans to join”.⁵⁹ The Committee will also closely monitor expected compliance with the 2027 TCA rules of origin, paying particular attention to any emerging risks or challenges.

Maximising compatible regulation

50. Product requirements in Great Britain for most industrial and consumer goods remain very similar to the EU requirements (which continue to apply in Northern Ireland). This is often because UK product law is based on the EU law that applied when the UK was a member of the EU and is now called “assimilated law”. The UK and EU have also shared membership of pan-European standards bodies that set technical standards adopted by both, even where laws, regulations and conformity assessment procedures differ.^{60 61}

51. As the UK operates outside the EU’s regulatory framework, regulatory divergence is possible and this can create frictions to trade. Regulatory divergence can come in two forms: active divergence where the UK changes its rules, or passive divergence, where the EU changes its rules and the UK does not automatically update its rules alongside, often described as ‘alignment’. With regards to alignment, at our oral evidence on 26 November 2024, the Secretary of State told us:

As a country and as an economy, we are too big and too important to outsource the regulation of any part of our economy to another body. If you want that to be setting the rules, you have to be part of the organisation that sets the rules.⁶²

52. In recent months, several decisions on alignment in product requirements in the UK have been taken including the introduction of the Product Regulation and Metrology Bill, the continued acceptance of EU product safety marking in Great Britain, and recent decisions not to use the Stormont Brake to block incoming EU chemical labelling and packing regulations on labelling requirements applied in Northern Ireland.⁶³

53. The Committee has received many differing views from stakeholders on the question of maximising compatible regulation.

a. In oral evidence, Tom Brufatto, Executive Director of Policy and Research, Best for Britain, told us that deep alignment in goods could grow UK GDP by 1–1.5%, and the UK and EU can expect a boost in exports of around $20bn, whilst still remaining within the negotiating lines of no return to the single market or customs union.⁶⁴

Through our call for evidence and draft consultations, we heard from industry:

b. The Society of Motor Manufacturers and Traders (SMMT) emphasised the value of regulatory cooperation, identifying it as one of the top three trade policy priorities for the sector, alongside avoiding tariffs and smoothing customs operations. They stated:

“The UK Government should work with the EU to mutually recognise equivalent policy outcomes or link similar regulatory frameworks, where deemed appropriate. Wherever possible, the automotive regulatory framework and associated testing should be able to be mutually recognised, notwithstanding the need for complete regulatory alignment.”⁶⁵

c. The Chemicals Industries Association told us “The UK should remain “closely connected” but any decisions on Swiss type or any other alignment model, must guarantee friction free access to respective markets. In addition, alignment with EU REACH cannot be considered in isolation given the interconnectivity to other chemicals legislation.⁶⁶

d. The Wine and Spirit Association provided an example of the benefits to maximising compatible regulation between jurisdictions. For example, “In March, the EU Commission published a new regulatory package for wine that included updated labelling descriptors for de-alcoholised and alcohol-free wines, and electronic labelling. The WSTA recommends that the UK Government should commit to using electronic delivery of labelling changes, and codify no-and-low labelling descriptors for alcohol products, aligning the wine descriptors with the EU Commission’s. The ‘alcohol free’ threshold should be 0.5% ABV.”⁶⁷ However, the Wine and Spirit association also cautioned against assuming alignment is a universal solution, stating:

“we should not view dynamic and comprehensive alignment with the EU as a ‘silver bullet’. The UK can utilise regulatory flexibilities to create clear incentives for global investment in the UK, including from significant deep-sea markets such as Australia and New Zealand. One such example is legislating to introduce the flexibilities offered in the draft third tranche of DEFRA wine reforms.”⁶⁸

e. The Food and Drink Federation stated: Dynamic alignment should not be seen as a silver bullet to solve UK-EU/NI trade. A strategic way forward is required in the form of a regulatory development action plan alongside much more effective information sharing and technical exchanges with the EU. We should avoid passive divergence by making timely, active decisions on the applicability of new measures to UK interests and production patterns.⁶⁹

54. In light of this feedback, the Committee reiterates its recommendation from the original report:

Energy Prosperity

55. Cooperation in energy trading is essential to achieving the UK’s and Europe’s shared energy and economic objectives with lower cost electricity. Objectives include, but are not limited to, reducing carbon emissions in line with respective climate targets, decreasing reliance on Russian gas, and lowering energy costs for consumers. In particular, the UK and North Sea countries have huge ambition: 300 gigawatts of offshore wind potential by 2050.⁷⁰ To facilitate clean energy trade and support economic growth, this chapter will explore whether and how the UK and EU may be able to strengthen cooperation in infrastructure planning and address barriers to trade.

56. The Committee received strong support for our recommendations to improve energy trading between the UK and the EU. The Committee is pleased to note the strong consensus among stakeholders. Indeed, “doing more with the EU to improve our interconnections…and make the most of our shared energy systems” was outlined as a priority in a speech by the Prime Minister at the end of April.⁷¹

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Figure 3: Support for Recommendations on “Energy Prosperity”

Source: Confidential Stakeholder Survey, Business and Trade Committee (2025)

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Connecting Electricity Trading Systems

57. The UK-EU TCA recognises that despite the UK’s withdrawal from the Internal Energy Market and exit from the EU’s electricity trading arrangements (‘market coupling’), there is a necessity for UK-EU electricity trading to take place as efficiently as possible in the new legal context in order to reduce costs for UK and EU consumers.⁷² This is also key to ensuring there are no barriers to the efficient development of cross-border energy infrastructure, an essential part of the development of the North Sea.⁷³ The National Grid told us UK’s exit from Single Day Ahead Coupling (SDAC):

has reduced the efficiency of electricity trading. The existing trading rules also make developing trading arrangements for Offshore Hybrid Assets extremely complex. Essentially, the wind farm is party to two different sets of trading arrangements (operating with different rules and different timings) and the ability to make efficient decisions is significantly reduced.⁷⁴

58. The National Grid estimates that the loss of efficiency due to explicit trading results in a 25% loss of value when capacity is sold to the market, equating to an estimated €350 million annual cost. This inefficiency raises costs for consumers and complicates the deployment of renewable energy in the North Sea, making large-scale offshore projects more difficult and expensive to deliver.⁷⁵

59. In October 2024, UK and EU industry representatives jointly wrote on North Sea Energy Cooperation to ministers to outline that a price coupling mechanism is essential and proposed an alternative solution based on a commercial extended price coupling service,^{76 77} arguing that:

The solution would require only limited changes to Annex 29 of the TCA, which is within the remit of the Specialized Committee for Energy […] and fully respect the existing EU regulatory framework.⁷⁸

Joining together our Carbon Border Mechanisms & Linking Emissions Trading

60. On 17 May 2023, the EU adopted the Carbon Border Adjustment Mechanism (CBAM), which is currently in a transition phase.⁷⁹ CBAM aims to prevent goods produced in countries with weaker climate policies from gaining an unfair competitive advantage over EU-produced goods by imposing a carbon tariff on imports of certain carbon-intensive goods, like steel, aluminium, fertilisers and electricity. The UK plans to implement its own CBAM by 2027, with similar objectives but different in design and scope.

61. As things stand, the UK CBAM will apply to imports from the EU and vice versa.⁸⁰ This means that trade in certain goods will face additional paperwork and potentially a carbon tax, as the UK and EU carbon prices have diverged.⁸¹ The UK’s total exports of regulated products to the EU amounted to around £6.7 billion in 2021. At £4.8 billion and £1.2 billion respectively, exports of iron and steel and aluminium contributed more than 88% of these exports, and estimates suggest that more than 32,000 people are directly employed in producing these exports to the EU.⁸² Box 3 below contains a case study of the impact of the EU CBAM on Great British electricity exports.

Box 3: Carbon Border Adjustment Mechanism and electricity trading

62. One way to mitigate the trade impact of these mechanisms is for the UK to link its Emissions Trading System (ETS) with the EU ETS, which would help align carbon pricing in both markets and allow for carbon border taxes to be waived. Exports from Iceland, Norway, Switzerland, and Liechtenstein are already exempt from EU CBAM because they are either part of the EU ETS, or linked to it.⁸³ In addition, a UK/EU ETS linkage would avoid harm to the island of Ireland’s energy market.⁸⁴ At the end of April, industry wrote to UK and EU leaders urging them to link the UK and EU Emissions Trading Schemes, arguing that linkage would lower the costs of decarbonisation, unlock market confidence, and accelerate the delivery of clean energy.⁸⁵

63. Rebecca Sedler, Managing Director, National Grid Interconnectors, told us that the National Grid is “incredibly keen for the UK Government, as part of the reset […], to ensure that energy, specifically CBAM, is one of the topics covered, so we can work towards closer collaboration and ensure that this is sensibly implemented.”⁸⁶ The Minister for EU relations told us that: “There is already a commitment in the existing trade and cooperation agreement to look at linking our carbon border adjustment mechanism … linking our respective systems—that is what the ambition is.”⁸⁷

Prosperity in Services

67. UK services growth has, in recent years, been the strongest of the G7, ending 2023 at around 12% above pre-pandemic levels. The remaining G7 countries, at the end of the third quarter of 2023, reached around 9% above on average.⁸⁸

68. The Trade and Cooperation Agreement (TCA) established the new foundational framework for services trade between the UK and the European Union. Key provisions include national treatment, local presence, and visa free entry up to 90 days.⁸⁹ However, these provisions are subject to exceptions outlined in annexes, which vary by member state. For example, a UK national cannot sell actuarial services in Italy or construction services in Cyprus.⁹⁰

69. The Committee received extremely high levels of support for our recommendations to improve services trade with the EU with the highest levels of support for measures to protect digital services, and to deepen research collaboration. Our proposal to introduce a visa-based, age-capped, time-limited youth mobility scheme, with due transparency over the inclusion or omission of migrant statistics to maximise clarity, was also strongly supported, with 80% of respondents in agreement.

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Figure 4: Support for Recommendations on “Prosperity in Services”

Source: Confidential Stakeholder Survey, Business and Trade Committee (2025)

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Protecting digital services from imminent threat and expanding digital trade

70. Digital technology is a key driver of productivity growth, and the UK’s regulatory environment plays a critical role in incentivising innovation, investment, and technology adoption. The European Commission’s recent ‘Draghi Report’ on European competitiveness highlighted concerns over regulatory complexity in the tech sector, suggesting that an overly precautionary approach could inhibit innovation.⁹¹ The subsequent EU Competitiveness Compass proposes the development of a Data Union Strategy to improve secure private and public data sharing, simplify the regulatory regime, and accelerate new technological developments.⁹²

71. The EU’s decision on data adequacy regarding the UK’s personal data protection regime is set to expire unless renewed by the European Commission.⁹³ While adequacy decisions do not require full alignment with EU GDPR, they require an adequate level of data protection. During our engagement in Brussels, we heard that positive discussions between UK and EU institutions were occurring about the Data (Use and Access) Bill, which is currently before Parliament.

Boosting financial services exports

73. As the largest net exporter of financial services and the second-largest financial services exporter globally, the UK enjoys a clear competitive advantage in this sector. Financial services trade generated a surplus of £92.2bn in 2023 which is equivalent to over half the entire UK services trade surplus.⁹⁴ UK trade in financial services with EU countries has changed significantly between 2017 and 2023. The proportion of financial services exports going to the EU was 40% in 2017 compared to 34% in 2023.⁹⁵

74. Academics from the UK Trade Observatory (UKTPO) told us that although the TCA is ambitious in a few selected services sectors such as telecommunications, international maritime transport and digital trade, there is a general sense that TCA provisions are a major setback for many services sectors that have hitherto relied on UK regulation being recognised in other EU economies. This is particularly the case for financial services with the loss of passporting rights, and generally the limited mobility for business personnel affecting many services professions.⁹⁶

75. City UK told this inquiry that “The Government should use the EU-UK Financial Regulatory Forum to ensure that the issues of greatest importance and consequence to the UK industry continue to be discussed and that the Forum focusses on forward-looking issues.” Similarly, the City of London Corporation “welcomed the Forum’s role in ensuring aligned approaches to T+1 settlement, for example, and want the Forum to build on this best practice.”^{97 98}

Deepening research cooperation

77. The EU Framework Programmes for Research and Technological Development, also called Framework Programmes or abbreviated FP1 to FP9, are funding programmes created by the EU to support and foster research in the European Research Area. The UK’s collaboration through EU Framework Programmes is rooted in longstanding ties of friendship, shared expertise, and common values. Scientists and innovators from the UK and EU are working together on critical issues facing our societies – from climate and the clean energy transition, to supporting our common economic resilience.⁹⁹

78. The UK has been associated to Horizon Europe (FP9) since the start of 2024.¹⁰⁰ Recent figures have been published showing that, in 2024, nearly 3,000 grants worth €575m were awarded to the UK. The University of Cambridge was the top beneficiary, receiving €42m, followed by Oxford at €39m, and University College London and Imperial with about €28m.¹⁰¹

79. In our draft “Green Paper”, the Committee recommended that the Government should urge the EU to allow all elements of the next research programme, FP10, to be open to third-country participation, and urged the Government to engage with UK research communities to maximise UK participation. This was one of the most widely supported recommendations, with 96% respondents saying they strongly agree or agree.

80. Buckinghamshire Business First provided one illustrative piece of evidence, telling he Committee that the Government should look to:

“Improve collaboration with the EU on innovation investment and support programmes. Funding for business innovation and support is increasingly scarce in the UK, and there could be opportunities for businesses in enabling them to access these programmes. If feasible, UK businesses should also be granted access to the Culture Programme, Life Programme, inter-regional programmes, and other research initiatives”.¹⁰²

Pushing ahead with Mutual Recognition of Professional Qualifications

82. Regulated professions, such as medicine, nursing, and architecture, are overseen by national authorities, meaning qualifications obtained in one country are not automatically recognised in another. To facilitate cross-border services provision, the TCA established a mechanism for sector-specific agreements on mutual recognition of professional qualifications (MRPQ).¹⁰³ However, the only formal proposal, submitted by UK and EU architects’ bodies, was rejected by the European Commission in 2023.¹⁰⁴

83. The UK Government has identified mutual recognition of professional qualifications (MRPQ) as a priority area for trade in services.¹⁰⁵ Speaking to this Committee, the Minister for Trade Policy and Economic Security stated:

Regulated professions are at the top of the list because […] “other business services”—that ONS categorisation that recognises non-regulated professions—is growing very strongly. We have not seen equivalent progress in relation to recognition of professional qualifications. In that sense, we are talking to the regulatory bodies at the moment, but it is a process both of understanding which bodies need the most help, given that some of them have bilateral relationships in place, and engaging in time with the European Union.¹⁰⁶

84. This priority is also reflected by UK industry. Lloyds of London told this inquiry that its priorities for an EU reset included “A strengthened UK-EU trading relationship in insurance could involve the EU granting the UK equivalence for reinsurance purposes, the UK and the EU delivering long term certainty on the adequacy of each other’s data protection frameworks, and both parties enhancing cooperation on the Mutual Recognition of Professional Qualifications”.¹⁰⁷

85. Our consultation demonstrated strong support for its advancing mutual recognition of qualifications:

• The Royal Institute of British Architects (RIBA) expressed firm agreement with the recommendation to prioritize MRPQ and emphasized that it should be integrated into the trade agenda of any potential reset.¹⁰⁸
• Virgin Atlantic also strongly concurred with the Committee’s recommendation to pursue negotiations on MRPQ. However, they also urged the Committee to “recommend taking action rather than further strategies/roadmaps. This would reflect the urgent need for an agreement in industries critical to economic growth, such as aviation.”¹⁰⁹
• The Travel Association (ABTA) advocated for “the Department for Business and Trade [to] initiate a rapid consultation with various sectors of the UK economy. This would enable the UK Government to negotiate with the EU on all relevant qualifications, including those in travel and tourism-related professions, such as UK-qualified skippers, pilots, ski instructors, and tour guides.”¹¹⁰

86. Virgin Atlantic also provided a case study illustrating the adverse effects of the absence of MRPQ on their operations (see Box 4). These case study offers further evidence of the significance of MRPQ as a priority area.

Box 4: Impact of lack of Mutual Recognition on Pilots

Backing Touring Artists

87. The UK Government has committed to supporting touring artists seeking to work in the EU.¹¹¹ The Minister for Trade Policy stated “the creative industries are hugely important to us. It is an issue that we frequently hear about as individual constituency MPs, and it is one of the areas that we are focused on”.¹¹²

88. The end of free movement has introduced new administrative and financial barriers, particularly for musicians, theatre performers, and production teams. A report of the Independent Society of Musicians (ISM), based on a survey of 400 musicians, found that almost half of the respondents said that they had less work in the EU after January 2021, and the most frequently cited expense was for visas and work permits (23%).¹¹³ Further challenges included customs regulations affecting the transport of musical equipment and merchandise.¹¹⁴

A creative and ambitious Youth Experience scheme

90. To foster the UK’s trade relationship with the EU, it is essential that younger generations develop strong personal connections. The EU and many in the UK desire the establishment of a robust youth exchange programme, akin to those already in place with countries such as Australia. As the EU-UK Parliamentary Partnership Assembly expressed in its recommendation in March 2025, it:

Stresses that people-to-people contacts are at the core of the UK-EU relationship and that the UK leaving the EU has had a negative impact on touring artists and young people affecting their ability to benefit from youth, cultural, educational, research, employment and training opportunities. Recognises that cross border collaboration and cultural exchange drives intercultural understanding, innovation and skills sharing. Underscores the need for both the UK and the EU to facilitate travel for touring artists to the maximum extent possible, and to establish a youth opportunity scheme, including apprenticeships.¹¹⁵

91. However, the Government has also prioritised lowering net migration across the course of the Parliament. We have also heard many ideas on what youth mobility means, and the Government must have at the forefront of any discussions its red line over a return to free movement. When speaking to the Lords European Affairs Committee, on Tuesday 10 December 2024, the Minister for European Union Relations,  repeated these points, stating:

On youth mobility more generally, it depends on precisely what you mean by youth mobility. There is the university sector and Erasmus+, but obviously that has financial implications. There is an idea about something wider, but the Government are pledged across the course of the Parliament to bring net migration down, and that is an objective that we are determined to achieve. To your earlier point about youth mobility generally, it is a matter for the EU how it wishes to put that forward and seeks to negotiate it, but we will have to see.¹¹⁶

92. We note that Office for National Statistics (ONS) net migration statistics include individuals who intend to stay in the UK for at least 12 months. This aligns with the UN definition of a long-term migrant, which is someone who moves to a country other than their usual residence for a period of at least one year.¹¹⁷ We note that these statistics are based on individuals’ stated intentions upon arrival. However, actual durations of stay can vary, and some individuals may leave before or after completing a 12-month period. The ONS adjusts its estimates accordingly as more comprehensive data becomes available.¹¹⁸

93. Our consultation solicited feedback from industry bodies on youth mobility. The Travel Association (ABTA) for example told us it has “been a steadfast advocate for a UK-EU Youth Mobility Scheme (YMS) [and] supports the recommendation to pursue a deal as part of the UK-EU reset.” However, the Association goes on to note that businesses require the confidence and flexibility to plan operations beyond 12-month periods and point to the fact that other UK youth mobility schemes are up to three years.¹¹⁹

Conclusion

95. The UK-EU reset represents a critical opportunity to shape Britain and Europe’s role within the global economy. Both Parties must reaffirm their commitment to free trade and mutual economic prosperity, ensuring that businesses, workers, and consumers benefit from a more stable and predictable trading relationship.

96. This report sets out 20 recommendations aimed at driving European growth ahead of the upcoming UK-EU Summit. Identified through extensive consultation, expert evidence, and in-person visits, these recommendations are aimed at providing pragmatic solutions to enhance market access, ease regulatory burdens, and support long-term economic resilience between the UK and Europe.

97. Evidence to our inquiry identified strong stakeholder support for policy proposals that enhance security and energy cooperation between the UK and Europe suggesting the Government should act quickly and decisively to deepen cooperation in these areas. We also received support for our recommendations on creating a shared European defence industrial policy, connecting electricity trading system, aligning carbon border policies, and enhancing co-operation in economic security, economic crime, guarding Critical National Infrastructure, and supporting international institutions. We would encourage the Government to also focus on these areas in any UK-EU reset, to maximise the benefits of our shared European values.

98. At the same time, stakeholders highlighted the complexities of easing trade in goods and services between the UK and Europe, and we recognise this presents significant challenges for the Government in the negotiations. We also note that perspectives on regulatory autonomy varied widely, both in general and in the specific context of an SPS agreement, underscoring the need for careful negotiation to balance trade facilitation with regulatory flexibility. Additionally, policy areas such as youth mobility bring inherent trade-offs between economic and cultural benefits and the Government’s commitments on immigration. The Government will need to navigate this with care. In contrast, there was uncontested support for introducing practical improvements in order to ease customs burdens, including measures such as trusted trader schemes, safety declaration waivers, and cargo facilitation.

99. In summary, the Committee’s work has identified the following key priorities for the UK-EU reset:

a. Defence and Security: Strengthening UK-EU cooperation in defence industries, intelligence-sharing, and critical infrastructure protection to enhance collective security and resilience, including continued support for Ukraine in its defence against aggression.

b. Energy Co-operation: Deepening collaboration on electricity market integration, aligning carbon border policies, and accelerating joint investment in clean energy to ensure long-term energy security and sustainability and support lower energy costs.

c. Smoothing Trade: Minimizing trade friction as much as possible through the policy solutions outlined in this report, including customs process simplifications, regulatory cooperation, and sector-specific trade facilitation measures to support businesses and economic growth.

d. Taken together, we believe these priorities represent the foundation for a more stable and forward-looking UK-EU partnership.

Annex 1: Note of Business and Trade Committee visit to Northern Ireland, 6 May 2025

1. As part of our consultation with business leaders and others on the recommendations of our “Green Paper” report, the Committee visited Northern Ireland on 6 May 2025. The primary purpose of the visit was to understand more about the unique trading arrangements operating between Great Britain and Northern Ireland. Recognizing the importance of these arrangements in shaping UK-EU trade relations, we considered it essential that the Committee be informed by an understanding of how these arrangements work on the ground in order to shape our recommendations.

Academics and Business Leaders

2. We first visited Queen’s University Belfast, where we had the opportunity to discuss UK-EU relations with Professors Katy Hayward and David Phinnemore. We then took part in a roundtable discussion with a range of representatives from across Northern Ireland’s business sector, to understand more about their experience of trading under the current arrangements, and their own priorities for the UK-EU reset.¹²⁰ The session offered valuable insights into the practical challenges and priorities for Northern Ireland under current trading arrangements.

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The Chair, Rt Hon Liam Byrne, addressing the roundtable of business leaders at Queen’s University Belfast.

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Harland & Wolff

3. We visited Harland & Wolff (H&W), which has been part of Belfast’s industrial heritage since 1861 and has recently become part of Spanish state-owned firm Navantia. We met with senior Navantia and H&W personnel to hear about the company’s role in delivering the Ministry of Defence’s Fleet Solid Support (FSS) contract, and the potential presented by Navantia’s investment for the Northern Ireland economy. We were particularly interested in what lessons can be learned for the role of defence procurement in UK industrial strategy, and the value of ensuring that UK materials (such as steel) are used in the construction of these critical national capabilities.

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The Committee visiting the Harland & Wolff shipyard, with the iconic “Samson” crane in the background.

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Belfast Harbour Infrastructure

4. The centrepiece of our visit was a tour of the infrastructure at Belfast Harbour designed to support the customs and sanitary and phytosanitary (SPS) checks required under the Windsor Framework. This included both the temporary facilities currently in operation and the larger permanent site under construction, due for completion by 1 July 2025. We held wide-ranging discussions with officials from HM Revenue & Customs (HMRC), Border Force, the Department for Environment, Food and Rural Affairs (DEFRA) and the Department of Agriculture, Environment and Rural Affairs (DAERA) on the implementation of these arrangements.

5. We also learned about the checks being carried out on live animals and products of animal origin (POAO), including those at Larne Harbour—the main site for livestock movements. Discussions covered the operation of the ‘green’ and ‘red’ lanes, the phased introduction of agri-food labelling requirements, and the various types of checks involved, including identity, physical, documentary and seal inspections.

Acknowledgements

6. We are very grateful to the businesses, academics and officials who provided us with their time and insights during our visit to Northern Ireland. We captured valuable information on the realities of Northern Ireland’s trading arrangements, which have informed the revised set of recommendations set out in this Report. The visit to Harland & Wolff also provided useful evidence for our ongoing inquiry into Industrial Strategy.

Conclusions and recommendations

1. The UK Government should seek a new, deep UK-EU Security Pact, including a shared defence industrial strategy to ensure that Euro-NATO allies are procuring the best equipment and most potent capabilities—without regard to country of origin within our pool of allies—in the most efficient and rapid way. (Recommendation, Paragraph 10)

2. Any new UK-EU security arrangements must include an explicit recognition that it would be mutually beneficial to act together to guard the critical national infrastructure on which the UK and EU business community depends, from those who wish it ill. (Recommendation, Paragraph 12)

3. The UK should work closely with the EU to strengthen coordinated action against non-market economies that undermine the international trading system through unfair practices, including use of forced labour, industrial subsidies, state-owned enterprise advantages, and forced technology transfers. Enhancing cooperation on trade defence instruments—such as anti-subsidy and anti-dumping measures—along with alignment of safeguards against use of forced labour in supply chains will help ensure a more effective and consistent response to market distortions that threaten fair competition. (Recommendation, Paragraph 15)

4. To support the fight against economic crime, we urge the Government to explore how to maximise opportunities to deepen law enforcement cooperation with the EU, in particular to secure real-time intelligence exchanges. We hope to see the announcement of a clear roadmap for further negotiations in this area at the forthcoming UK/EU summit. (Recommendation, Paragraph 18)

5. The UK and EU both support a stable free trading system. Like the EU, the UK Government should join the Multi-Party Interim Appeal Arbitration Arrangement (MPIA) to help uphold a functioning dispute resolution system while broader WTO reforms are negotiated. (Recommendation, Paragraph 21)

6. The Committee urges the Government to prioritise the minimisation of trade burdens in Northern Ireland as a fundamental element of any future UK-EU reset. This should be achieved through a strong emphasis on building trust between the Parties, maintaining clear and consistent communication with the Northern Irish business community and civil society, and ensuring Northern Ireland remains central to discussions on trade easements. (Recommendation, Paragraph 26)

7. We support the Government’s intention to negotiate a Sanitary and Phytosanitary (SPS) agreement with the EU to reduce the need for regulatory formalities and controls at the border for agri-food products, plants and animals. (Recommendation, Paragraph 31)

8. We concur with the recommendation of the EU-UK Parliamentary Partnership Assembly that there would be value in “providing a signal at or before the [UK-EU] Summit that a fair deal on fisheries will be reached” and call on the Government to enable a multi-year settlement. (Recommendation, Paragraph 36)

9. The Government should seek to maximise cuts to the red tape currently restricting free trade with the EU, taking full advantage of the customs cooperation provisions in the Trade and Cooperation Agreement. Specifically, it should pursue mutual recognition of UK and EU Authorised Economic Operator schemes for customs simplification, a bilateral waiver of safety and security declarations, and enhanced cooperation to facilitate roll-on, roll-off cargo traffic. In addition, the Government should consult with industry on a regular basis to identify and address further opportunities to streamline border processes. (Recommendation, Paragraph 43)

10. The Government should consult with industry on rejoining the Regional Convention on Pan-Euro-Mediterranean Preferential Rules of Origin as an alternative to the rules of origin arrangements agreed in the Trade and Cooperation Agreement. (Recommendation, Paragraph 49)

11. We recommend that the Government consults with the business community, unions, workers and consumer groups and identifies sectors of the economy where, over the next ten years, there could be mutual gains from maximising compatible regulation with the EU. This should include an assessment of the flexibilities the UK might need to maintain membership of existing trade deals like CPTPP, and to agree the free trade deals currently under negotiation with Switzerland and the Gulf Cooperation Council. Where there is significant mutual gain from compatible regulation with the EU, the Government should commit to a regulatory roadmap that maintains compatible regulations with the EU. It should also seek, where beneficial for both parties, mutual recognition of conformity assessments. (Recommendation, Paragraph 54)

12. Energy trade represents a major opportunity for enhanced UK-EU trade and cooperation. Given shared strategic objectives—reducing carbon emissions, improving energy security, and expanding renewables—both sides have a mutual interest in strengthening their partnership. (Conclusion, Paragraph 64)

13. To achieve the shared strategic objectives of reducing carbon emissions, improving energy security, and expanding renewables, the UK and the EU must prioritise energy cooperation in upcoming discussions. There is a clear need to move beyond the current state of implementation of Trade and Cooperation Agreement’s current electricity trading provisions, which industry has deemed unfit for purpose. The Government should review industry proposals for improving market coupling arrangements and seek to agree the most efficient electricity trading framework possible. (Recommendation, Paragraph 65)

14. To prevent the UK and EU’s respective Carbon Border Adjustment Mechanism schemes from becoming barriers to trade in electricity and carbon-intensive goods, when doing so maximises export potential and reduces consumer costs, the Government should seek to link, and keep aligned, the UK Emissions Trading Scheme with the EU Emissions Trading Scheme. The Government should ensure action is in place to mitigate any impacts while the EU’s Carbon Border Adjustment Mechanism is in place and the UK’s is not. (Recommendation, Paragraph 66)

15. We note the extensive cooperation between the Government and the European Commission on the Data (Use and Access) Bill. We recommend that the Government monitors the EU’s Data Union Strategy upon its publication, assesses implications for UK policy, and take whatever steps are required to ensure a permanent data adequacy agreement is secured. (Recommendation, Paragraph 72)

16. The Government should prioritise financial services in EU relations by using the EU-UK Financial Regulatory Forum to build on previous best practice and advance regulatory cooperation. (Recommendation, Paragraph 76)

17. To achieve the best outcomes in terms of innovation and in turn growth, we urge that the Government make the case for all elements of European Research Framework Programmes, including FP10, to be open to third-country participation, and urge the Government to engage with UK research communities to maximise UK participation. (Recommendation, Paragraph 81)

18. We recommend that the Government draws lessons from the slow pace of mutual professional qualification recognition negotiations to date, reassesses which mutual recognition agreements would contribute most to our mutual economic gain, and publishes a new roadmap of negotiating priorities for mutual recognition of qualifications. (Recommendation, Paragraph 86)

19. We recognise the importance of reducing barriers to trade for touring artists. Given the economic and cultural significance of these sectors, continued engagement between UK and EU regulatory bodies is necessary to facilitate smoother market access. (Recommendation, Paragraph 89)

20. The UK and the EU should consider the development of an ambitious, visa-based youth mobility scheme with a limited number of participants. This initiative would allow young people to spend up to 12 months in the UK or EU for cultural and educational exchange, facilitating language acquisition, fostering a deeper understanding of shared European history and heritage, and enabling work and apprenticeship opportunities. Such an initiative would contribute to the long-term strengthening of trust and cooperation, which are essential foundations for international trade relations and mutual security. (Recommendation, Paragraph 94)

21. The Committee urges the Government to pursue these opportunities urgently and decisively, ensuring Britain and Europe remain globally competitive and strategically aligned. (Recommendation, Paragraph 100)

Formal Minutes

Tuesday 13 May 2025

Members present:

Liam Byrne, in the Chair

Antonia Bance

John Cooper

Sarah Edwards

Sonia Kumar

Gregor Poynton

Joshua Reynolds

How to strengthen UK-EU relations: Policy Priorities for the Summit

Draft Report (How to strengthen UK-EU relations: Policy Priorities for the Summit), proposed by the Chair, brought up and read.

Ordered, That the draft Report be read a second time, paragraph by paragraph.

Paragraphs 1 to 100, read and agreed to.

Annex and Summary agreed to.

Resolved, That the Report be the Sixth Report of the Committee to the House.

Ordered, That the Chair make the Report to the House.

Ordered, That embargoed copies of the Report be made available (Standing Order No. 134)

Adjournment

Adjourned till Tuesday 20 May at 2.00pm

Witnesses

The following witnesses gave evidence. Transcripts can be viewed on the inquiry publications page of the Committee’s website.

Tuesday 21 January 2025

Rt Hon Douglas Alexander MP, Minister for Trade Policy and Economic Security, Department for Business and Trade; Rt Hon Nick Thomas-Symonds MP, Minister for Constitution and European Relations, Cabinet Office; Amanda Brooks CBE, Director General for Trade Policy, Implementation and Negotiations, Department for Business and Trade; Niall MacEntee-Creighton, Deputy Director, UK-EU Economic and Trade Partnership, Cabinet Office Q1–94

Tuesday 25 February 2025

The Lord Hannan of Kingsclere, President, Institute for Free Trade; Mr Marley Morris, Associate Director for Migration, Trade and Communities, Institute for Public Policy Research (IPPR); Tom Brufatto, Executive Director of Policy and Research, Best for Britain Q95–130

Tom Wills, Director, Trade Justice Movement; Rosa Crawford, Policy Officer, Trade Union Congress (TUC); Eric Gottwald, Trade and Globalization Policy Specialist, AFL-CIO Q131–142

Sarah Williams, Head of Strategic Partnerships, Green Alliance; Frank Aaskov, Director, Energy and Climate Change Policy, UK Steel; Rebecca Sedler, Managing Director of National Grid Interconnectors, National Grid Q143–157

Lord Mark Sedwill, Cabinet Secretary (2018–2020), Former National Security Adviser and Cabinet Secretary; Sean Sargent, Chief Executive Officer, Green Lithium; Sir Sherard Cowper-Coles, Chair, China-Britain Business Council; George Magnus, Research Associate, University of Oxford China Centre and School of Oriental and African Studies Q158–178

Tuesday 25 March 2025

Charlie Humphreys, Director of Corporate Affairs, Asia House; Ian Gibbons OBE, Chief Executive Officer, UK ASEAN Business Council; Douglas Barrie, Senior Fellow for Military Aerospace, International Institute for Strategic Studies Q179–192

Nicola Watkinson, Managing Director, International, TheCityUK; Harry Anderson, Head of Policy and Global Engagement, Universities UK; Johanna Kyrklund, Global Chief Investment Officer, Schroders Q193–217

Helen Brocklebank, Chief Executive Officer, Walpole; Mr Jonathan Brenton, Director of Public Affairs, Pernod Ricard; Alex Gover, Head of Business Development, IntralinkQ218–221

Published written evidence

The following written evidence was received and can be viewed on the inquiry publications page of the Committee’s website.

ELG numbers are generated by the evidence processing system and so may not be complete.

1 ADS Group ELG0016

2 AirportsUK ELG0021

3 Association of British Insurers (ABI) ELG0020

4 AstraZeneca ELG0011

5 Best for Britain ELG0007

6 British Educational Suppliers Association ELG0039

7 British Standards Institution ELG0025

8 Brown-Forman ELG0015

9 Centre for Business Prosperity and Enterprise Research Centre ELG0045

10 Centre for Cities ELG0030

11 Centre for Inclusive Trade Policy (CITP); and UK Trade Policy Observatory (UKTPO) ELG0019

12 Ceres ELG0009

13 Chemical Industries Association Ltd ELG0033

14 Collins, Professor David (Professor of International Economic Law, City St George’s, University of London) ELG0004

15 Dow ELG0028

16 Federation of Small Businesses ELG0032

17 Greater Manchester Combined Authority ELG0027

18 Horticultural Trades Association (HTA) ELG0029

19 Institute of Directors ELG0026

20 International Meat Trade Association (IMTA) ELG0001

21 Legrenzi, Dr Gabriella (Senior Lecturer in Economics and Finance, Keele University) ELG0038

22 Lloyd’s of London ELG0042

23 Manchester Airports Group ELG0002

24 Mandal, Dr Anandadeep (Associate Professor, University of Birmingham) ELG0005

25 National Farmers’ Union of England and Wales ELG0031

26 National Grid ELG0047

27 Quality Meat Scotland ELG0044

28 RenewableUK ELG0048

29 Rise Coalition ELG0013

30 Royal Institution of Chartered Surveyors ELG0040

31 Salmon Scotland ELG0041

32 Society of London Theatre & UK Theatre ELG0022

33 Tees Valley Combined Authority ELG0043

34 The Association of the British Pharmaceutical Industry (ABPI) ELG0046

35 The City of London Corporation ELG0034

36 The Food and Drink Federation ELG0012

37 The Growth Commission ELG0008

38 The Law Society ELG0010

39 The Society of Motor Manufacturers and Traders Ltd (SMMT) ELG0035

40 The Wine and Spirit Trade Association ELG0037

41 TheCityUK ELG0014

42 Trade Union Congress (TUC) ELG0049

43 UK Export Finance ELG0024

44 UK Trade Policy Observatory (UKTPO) ELG0018

45 UK Travel Retail Forum (UKTRF) ELG0023

46 University of Surrey Business School – The Centre for the Decentralised Digital Economy (DECaDE). ELG0006

47 Walpole ELG0017

48 West London Chambers of Commerce ELG0003

List of Reports from the Committee during the current Parliament

All publications from the Committee are available on the publications page of the Committee’s website.

Session 2024–25

Number	Title	Reference
5th	How to strengthen UK-EU relations	HC 814
4th	Post Office Horizon scandal redress: Unfinished business: Government response	HC 778
3rd	Make Work Pay: Employment Rights Bill	HC 370
2nd	Priorities of the Business and Trade Committee	HC 423
1st	Post Office and Horizon scandal redress: Unfinished business	HC 341

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Footnotes

1 Cabinet Office, Minister for European Union Relations speech at EU-UK Forum, 4 February 2025

2 Over the medium-term, the International Monetary Fund (IMF) expects the UK economy to grow faster than other advanced European economies but slower than the United States and Canada. International Monetary Fund, World Economic Outlook: Policy Pivot, Rising Threats, October 2024, p. 10

3 Oral evidence taken on 26 November 2024, Q4 [Jonathan Reynolds]

4 Oral evidence taken by the Liaison Committee on 19 December 2024, Q7 [The Prime Minister]

5 A Competitive Compass for the EU, 29 January 2025

6 Oral evidence taken on 26 November 2024, Q10 [Jonathan Reynolds]

7 Q30

8 Export led growth - Committees - UK Parliament Business and Trade Committee

9 Prime Minister’s Office, PM statement on defence spending, 25 February 2025

10 Prime Minister’s Office, PM statement at press conference on the Coalition of the Willing, 15 March 2025

11 European Commission, Speech by President von der Leyen on European defence at the Royal Danish Military Academy, 18 March 2025

12 For example, NATO has a target that 20% of defence expenditure should be spent on equipment. NATO - Topic: Funding NATO

13 ADS Group (ELG0016)

14 European Commission, “Statement by President von der Leyen with UK Prime Minister Starmer” (24 April 2025).

15 See: Article 17 of draft “Regulation establishing the Security Action for Europe (SAFE) through the reinforcement of European defence industry Instrument” (European Commission document COM(2025) 122, 19 March 2025).

16 European Commission, Joint Communication to strengthen the security and resilience of submarine cables, 21 February 2025, p. 16

17 Seabed warfare: Protecting the UK’s undersea infrastructure, House of Commons Library, May 2023

18 Remarks by the Foreign Secretary at the Chatham House event “Securonomics in the world” (22 May 2024). Specific avenues of dialogue and cooperation could include monitoring of inward and outbound investment, export controls on key strategic and emerging technologies; and shared supply chain analysis and warning systems.

19 European Commission, Joint communication to the European Parliament, the European Council and the Council on “European Economic Security Strategy”, 20 June 2023, p. 14

20 Responses from Committee survey (ELG0051)

21 In particular Title V of Part Three of the UK/EU Trade and Cooperation Agreement (“Cooperation with Europol”).

22 Title II of Part Three of the UK/EU Trade and Cooperation Agreement (“Exchanges of DNA, fingerprints and vehicle registration data”).

23 Article 654 of the UK/EU Trade and Cooperation Agreement.

24 HL Deb, 6 January 2025, col 505

25 For the first such instance was in 2016; see: Statement by the United States at the Meeting of the WTO Dispute Settlement Body

26 Society of Motor Manufacturers and Traders (ELG0035)

27 Under the Windsor Framework in the UK/EU Withdrawal Agreement, Northern Ireland is treated for legal purposes as if it is still part of the EU Customs Union and Single Market for goods. This requires the UK to apply in respect of Northern Ireland a range of EU laws and regulations, including on goods moved there from the rest of the UK.

28 Trading blows, Resolution Foundation, Trading blows: How should Britain buy and sell in a turbulent world?, December 2024, p. 3

29 Using the latest figures of the 4 quarters to the end of September 2024, Section 2.3, UK trade in numbers (web version) - GOV.UK,

30 Centre for Business Prosperity and the Enterprise Research Centre (ELG0045)

31 Joint statement on the Withdrawal Agreement Joint Committee, 29 April 2025

32 Q44

33 Jun Du, Gregory Messenger, and Oleksandr Shepotylo, Enhancing the Brexit Deal: Exploring the Impact of a UK–EU Veterinary Agreement on Agri-food Trade, April 2024, p. 4

34 Centre for Inclusive Trade Policy, An EU-UK SPS Agreement: The perils and possibilities of (re)alignment, 3 December 2024

35 Qq 52–53

36 Continued calls to find solution that enables EU-UK trade of seed potatoes, British Agricultural Bureau, 16 January 2025

37 Responses from Committee survey (ELG0051)

38 Responses from Committee survey (ELG0051)

39 Responses from Committee survey (ELG0051)

40 Annex 38 to the TCA, Articles 1 and 2, UK-EU Trade and Cooperation Agreement, 30 April 2021

41 Q53

42 UK Fisheries Statistics, House of Commons Library, October 2022

43 Salmon Scotland (ELG0041)

44 EU Customs Reform will introduce a new EU Customs Authority, which will oversee an EU Customs Data Hub. UK reforms centre around the Border Target Operating Model (BTOM) to manage imports into Great Britain.

45 For example, Chapter 5 (Customs and Trade Facilitation) includes provisions relating to Authorised Economic Operators / Trusted Traders (Article 110 and Annex 18), Facilitation of roll-on, roll-off traffic (Article 119).

46 European Commission, Mutual Recognition [accessed 12 March 2025]

47 A recommendation on this issue is made in British Chambers of Commerce, The Trade and Cooperation Agreement Four Years On: A manifesto to reset UK-EU trade, December 2024, pp 10, 35. For details of the EU’s agreements with Norway and Switzerland, see: European Commission, “New customs agreements with Switzerland and Norway” (15 March 2021).

48 Article 119 of the UK/EU Trade and Cooperation Agreement designed to facilitate the high volume of traffic on sea ferries.

49 Food and Drink Federation (ELG0012)

50 Society of Motor Manufacturers and Traders (ELG0035)

51 Responses from Committee survey (ELG0051)

52 Responses from Committee survey (ELG0051)

53 For example, one ‘rule’ could be that at least 50% of the value of the good must be produced in the UK or the partner country to lower tariffs under the FTA. So, when exporting under the UK-EU TCA, under this rule, 50% of the value must come from the UK or the EU.

54 European Commission, The EU-UK Trade and Cooperation Agreement, 30 April 2021, Chapter 2

55 Walpole (ELG0017), Dow (ELG0028)

56 Customs Clear, Should the UK rejoin PEM?, January 12 2025

57 Letter from the Society of Motor Manufacturers and Traders relating to their position on PEM, 24 April 2025

58 They also identified agreeing shared guidance on the definition of Cathode Active Materials for the purposes of EV rules of origin calculations as an immediate priority.

59 Rules of Origin, PQ 28625, 4 February 2025

60 The UK’s National Standards Body, The British Standards Institution (BSI) is a continued member of the European regional standards organizations CEN, CENELEC and ETSI. British Standards Institution (ELG0025)

61 The UK has maintained the system of presumption of conformity through the use of ‘designated standards.’ The use of a common set of standards also supports trade between the rest of the UK and Northern Ireland which remains subject to EU single market product regulations, including the use of harmonised European standards, as part of the Northern Ireland Protocol as amended by the Windsor Framework. British Standards Institution (ELG0025)

62 Q11

63 NI secretary Hilary Benn declines to use Stormont Brake despite unionist pressure over new EU label requirements | The Chartered Institute of Export & International Trade

64 Best for Britain (ELG0007) or Q106

65 Responses from Committee survey (ELG0051)

66 Chemicals Industries Association (ELG0033)

67 Responses from Committee survey (ELG0051)

68 Responses from Committee survey (ELG0051)

69 Food and Drink Federation (ELG0012)

70 Q155

71 PM remarks at the IEA Future of Energy Security summit: 24 April 2025

72 European Commission, The EU-UK Trade and Cooperation Agreement, 30 April 2021, Chapter 2

73 National Grid (ELG0047)

74 National Grid (ELG0047)

75 National Grid (ELG0047)

76 Energy UK, The time is now to pave the way for efficient electricity exchanges between the EU and the UK, 11 October 2024

77 The commercial solution described by energy providers suggests “The GB market would not become a member of SDAC but would instead procure a clearly defined (and limited) service provided by SDAC which remains under EU control. Once implemented in SDAC, it should be quickly followed by a roll out in the intraday timeframe (SIDC) considering its importance for the variable renewable energy sources. Such a solution would need to be accompanied by operational agreements between parties, guaranteeing coordinated and harmonized operations.” Energy UK, The time is now to pave the way for efficient electricity exchanges between the EU and the UK, 11 October 2024 (p.2)

78 Energy UK, The time is now to pave the way for efficient electricity exchanges between the EU and the UK, 11 October 2024, p.2

79 In February 2025, the European Commission proposed some technical simplifications to EU CBAM to assist its implementation, including delaying first payments of the tax until 2027. European Commission, Proposal for a REGULATION OF THE EUROPEAN PARTLIAMENT AND OF THE COUNCIL amending Regulation (EU) 2023/956 as regards simplifying and strengthening the carbon border adjustment mechanism, 26 February 2025.

80 The precise implications of EU CBAM for Northern Ireland under the Windsor Framework are unclear at this stage.

81 Bloomberg, UK Carbon Prices Surge as Minister Talks About EU Market Linkage, 12 March 2025.

82 Centre for Inclusive Trade Policy (CITP), The economic significance of the EU CBAM in the UK, 20 February 2024, p,2, p.12

83 KPMG, EU Carbon Border Adjustment Mechanism (CBAM)

84 Energy UK, Borderline Confusion: Carbon Border Adjustment Mechanisms in Northern Ireland, 29 January 2025.

85 Joint letter – Time to strengthen EU-UK cooperation by linking the EU and UK ETS, Wind Europe, April 2025

86 Q149

87 Q69

88 Institute of Directors (ELG0026)

89 Firstly, a commitment to national treatment implies that each Party does not operate discriminatory measures benefiting domestic services or service suppliers. Secondly, local presence provisions require that neither Party shall require a service supplier of the other Party to establish or maintain a representative office or any form of enterprise, or to be resident, in its territory as a condition for the cross-border supply of a service.

90 Institute for Government, UK–EU Trade and Cooperation Agreement, December 2020. For the latest detail, please refer to the Reservations to the Services Chapter of the UK-EU TCA provided by the UK Government.

91 European Commission, The future of European competitiveness: Report by Mario Draghi, September 2024, p.30

92 European Commission, A Competitiveness Compass for the EU, 29 January 2025, p.6

93 On 18 March 2025, the EU Commission proposed to adopt an extension of the two 2021 adequacy decisions with the United Kingdom for a period of six months.  With this extension, the free flow of data with the UK would be maintained until 27 December 2025 [European Commission, Press corner, 18 March 2025].

94 City of London Corporation (ELG0034)

95 House of Commons Library, Financial services in the UK, 18 November 2024, p.23

96 UK Trade Policy Observatory (UKTPO) (ELG0018)

97 TheCityUK (ELG0014)

98 T+1 settlement refers to the process of settling financial trades one business day after the transaction date, reducing counterparty risk and aligning the UK more closely with international markets. Published in March 2024, a UK Government taskforce recommended that the UK should commit to moving to a T+1 standard settlement cycle at the latest by the end of 2027.

99 UK position on EU’s Research and Innovation Framework Programme, Department for Science, Innovation and Technology, 26 September 2024

100 United Kingdom joins Horizon Europe programme, European Commission, 4 December 2023

101 Horizon Europe country profile: United Kingdom

102 Responses from Committee survey (ELG0051)

103 European Commission, The EU-UK Trade and Cooperation Agreement, 30 April 2021, Article 158

104 Joint Recommendation submitted in October 2022 by the Architects’ Council of Europe and the Architects Registration Board in the United Kingdom, pursuant to Article 158(3) of the TCA was rejected by the European Commission. A deal on mutual recognition of qualifications for architects between Canada and the EU was submitted in 2018 and approved by the EU in 2023.

105 Labour, Change: Labour Party Manifesto 2024, p.118

106 Q62

107 Lloyd’s of London (ELG0042)

108 Responses from Committee survey (ELG0051)

109 Responses from Committee survey (ELG0051)

110 Responses from Committee survey (ELG0051)

111 Labour, Change: Labour Party Manifesto 2024, p.118

112 Q64

113 The Independent Society of Musicians, Paying the Price, August 2023, p.23

114 Touring Artists Case Studies, Touring with a Carnet ARA, August 2022

115 5th EU--UK Parliamentary Partnership Assembly, Recommendation on strengthening the EU-UK partnership, 17–18 March 2025, Brussels, p.3

116 Oral evidence taken by the House of Lords European Affairs Committee on 10 December 2024, [Rt Hon Nick Thomas–Symonds MP] Q9

117 Office for National Statistics, Understanding international migration statistics, 28 November 2024, p.3

118 Office for National Statistics, Understanding international migration statistics, 28 November 2024, p.4

119 Responses from Committee survey (ELG0051)

120 Stakeholders included: A&L Goodbody, CBI, Collins Aerospace, Fortior Insight, FSB, Intertrade Ireland, Invest NI, KPMG, NI Chamber, Spirit AeroSystems, W&R Barnett