Labour banks on EU trade deal to restore UK’s global investment appeal

Labour banks on EU trade deal to restore UK’s global investment appeal

Modest economic lift seen as part of broader strategy to attract global capital

Following the announcement of a new economic agreement with the European Union, Labour leaders are positioning the deal as a key component in their broader effort to revitalise the UK’s economy and restore investor confidence. Chancellor Rachel Reeves described the package as one of the most favourable arrangements ever secured by a non-EU member, but acknowledged that its direct economic impact will be modest—just 0.3% of GDP growth over 15 years, or £9 billion.

Still, the government views the deal as symbolically and strategically significant. In combination with recent trade achievements with India and the United States, it forms what Labour hopes will be perceived as a coherent signal: Britain is once again open for business and investment.

“It shows Britain now is the place to put investment and business,” Reeves said. “We’ve got preferential deals with the biggest economies around the world.”

Three pillars of the EU deal: food, energy, and defence

The agreement includes several critical features that have been widely welcomed by business groups, even as further negotiations remain ahead. Chief among these is the establishment of a long-sought sanitary and phytosanitary (SPS) zone, aimed at eliminating onerous food and agricultural checks by aligning UK regulations with EU standards.

This change is expected to lower costs for exporters, especially in sectors such as fisheries and fresh produce. The British Chambers of Commerce described the deal as “a huge boost,” citing its potential to “cut costs, reduce waste and increase sales.”

A second element is enhanced cooperation on energy and emissions policy. The UK and EU have agreed to align their emissions trading schemes, enabling mutual exemptions from carbon border adjustment mechanisms (CBAM). According to government figures, this measure alone could save the UK steel industry up to £25 million annually, contributing about 0.1% of the forecasted GDP growth.

The third pillar relates to defence industry cooperation. Although details remain sparse, the EU-UK agreement references potential joint initiatives under the forthcoming Security Action For Europe (SAFE) fund. British firms such as BAE Systems could gain access to EU defence contracts, providing new commercial opportunities amid rising military expenditure across the continent.

Fisheries tensions remain, but economic impact is minimal

One of the most politically contentious points—the issue of fishing rights—delayed the finalisation of the agreement, though analysts note that its economic significance is minor. The Resolution Foundation reports the fishing industry has suffered disproportionately under the original Brexit terms, with output as much as 30% below pre-Brexit forecasts.

Labour hopes that smoother food transit under the new SPS framework will offer more practical benefits to the fishing sector than prolonged disputes over territorial waters.

The broader economic gamble: credibility and confidence

Despite the relatively small projected gains in GDP, Labour views the new EU deal as a pivotal moment in rebranding the UK’s global economic role. Reeves and Prime Minister Keir Starmer are betting that a combination of regulatory alignment, stable leadership, and international diplomacy can help rebuild Britain’s reputation as an attractive, stable environment for business.

John Springford of the Centre for European Reform questioned the government’s optimistic modelling, suggesting that the estimated 0.3% GDP boost may be inflated. His analysis posits that the UK economy remains 5% smaller than it would have been without Brexit.

Nevertheless, Labour is prioritising the less tangible benefits: investor perception, political stability, and restored access to key markets.

“These deals won’t transform the economy overnight,” said one Treasury official, “but they send a clear signal to the world: the UK is back at the table.”

More than numbers: building a new narrative for UK growth

After a turbulent period marked by economic stagnation and political volatility, Labour is now attempting to chart a path toward recovery grounded in credibility and international cooperation. The recent trifecta of deals—with India, the US, and now the EU—represents more than just incremental GDP gains; it’s a strategic reset aimed at regaining trust from global investors.

While challenges remain, particularly regarding full reintegration with the EU’s economic structures, the Labour government hopes that its pragmatic approach can rekindle confidence and deliver the growth it has promised.

Stay tuned to The Horizons Times for the latest developments on UK trade, economic strategy, and post-Brexit recovery.