Starmer’s growth plan ‘doomed’ without access to EU markets, warn economists

A Labour government under Keir Starmer will fail to maximise the UK’s economic growth unless it takes the country back into the European Union’s single market and customs union, leading economists and diplomats have said.

The warnings come as an Opinium poll for the Observer finds that 56% of voters now believe Brexit has been bad for the UK economy as a whole, compared with just 12% who believe it has been economically beneficial.

Some 62% of people questioned also believe Brexit has contributed to higher prices in shops, against 8% who think that it has had the opposite effect.

With less than two weeks to go until polling day Labour has increased its overall lead to 20 points over the Conservatives and is firmly on course for a large Commons majority.

But there is increasing pressure on Starmer and shadow chancellor Rachel Reeves to spell out how they plan to deliver on their manifesto pledge of securing the highest sustained economic growth of any G7 country while keeping within tight fiscal rules, and while post-Brexit barriers to trade remain in place between the UK and EU.

The Office for Budget Responsibility says UK GDP will be around 4% lower every year than it would have been had we remained inside the EU.

Starmer insisted while campaigning in south London that On Saturday he would not rejoin the bloc either in the short or longer term. “We are not rejoining the EU, we are not rejoining the single market or the customs union,” the Labour leader said.

Asked if he would ever reconsider this, he added: “No. It isn’t our plan, it never has been. I’ve never said that as leader of the Labour party and it is not in our manifesto.”

While EU leaders are said to be determined not to allow a Starmer government to “cherry pick” its way to a preferential economic relationship without paying into the EU budget and accepting freedom of movement, Starmer said he still believed he could “get a better deal with the EU, and if we are elected to government that is what we will endeavour to do”.

Economists are clear, however, that without access to the single market, which allows goods to cross into the EU without extra costs and paperwork, and vice versa, the UK’s economic progress will be seriously impeded.

Dimitri Zenghelis, an economist and Brexit expert at the London School of Economics (LSE), said extra barriers since 2020 had cut trade with the EU and stifled investment.

He said Labour’s plans to talk to Brussels in a less combative way would “change the mood music for foreign investors”, but that only by rejoining the single market and customs union “could the UK shift the dial in a meaningful way”.

A report last week by the LSE found that the trade and cooperation agreement signed on 30 December 2020 by then prime minister Boris Johnson had “reduced exports to the EU by around 30% for small firms” and “perhaps around 20,000 small firms have stopped exporting goods to the EU entirely”.

It warned the next government that any trade deals with countries outside the EU would make little impact on trade flows.

Prof Stephen Millard of the National Institute of Economic and Social Research, who worked for 26 years at the Bank of England, said it was clear that single market membership would boost trade and competition. “The closer we are able to get to where we were [as full members of the EU] then the higher growth we will get out of it. We could certainly enjoy higher growth if we were to have a closer relationship with Europe.”

Keir Starmer puts wealth creation at heart of Labour manifesto – video

Former EU permanent representative to Brussels Kim Darroch described Brexit as an act of economic “self-harm” while another very senior EU diplomat said: “We used to be a far more effective trading nation than we are now. The cause of that is Brexit. There is no getting away from that.”

Opinium found that a total of 56% of voters now want a closer relationship with the EU, with 32% wanting to completely rejoin the bloc.

With Brexit more of an issue in the election north of the border, the SNP yesterday highlighted comments by Tory candidate for Aberdeen South, John Wheeler, who said at a hustings that Brexit “is not working for multiple businesses across Aberdeen and the north east”.

Writing in the Observer Labour’s national campaign co-ordinator Pat McFadden cautioned against the idea that the party has a massive election victory in the bag.

Although the Tories are in ever increasing despair on the campaign trail, after recent revelations about senior figures putting bets on a 4 July election before it was called by Rishi Sunak, McFadden says the result is anything but decided.

Clearly worried that complacency will set in he writes: “It is one thing for polls to take a snapshot of public opinion. It’s another entirely for them to influence voting behaviour. Particularly when it is reinforced by a cynical voter suppression strategy from the Tory party telling people the outcome is known so they don’t have to bother to vote.

“No way is this election a done deal. The headlines about the clutch of MRP polls disguise a huge level of uncertainty.

“ Up to 20% of voters taking part in these polls say they have yet to make their minds up or are uncertain how to vote. This could easily be 4-5,000 people per constituency. No wonder one poll said there are 175 seats which are too close to call.”

The Guardian