The EU/UK relationship ‘reset’: what is the impact on trade?

This is of course an interesting time for the EU/UK relationship: it has been nine years since the Leave vote in 2016, five years since the UK actually left the EU on 31 January 2020 and two years since the Retained EU Law (Revocation and Reform) Act 2023. 

In that period, we have seen the UK diverge from the EU in important respects, including laws relating to procurement, social media, artificial intelligence, sanctions, tariffs and trade policy. 

How will this change following the landmark meeting on 19 May 2025 at Lancaster House in London between Prime Minister Sir Keir Stramer and President of the European Commission Ursula von der Leyen?

That meeting was the first EU/UK summit (and the first in a series of promised annual summits) and is being described as the beginning of a UK/EU reset. 

The announcement of the new Security and Defence Partnership Pact, with its focus on dialogue and cooperation on security and defence, including mutually beneficial enhanced cooperation created by the SAFE instrument, once adopted, is of course significant, but what concrete measures were agreed in the context of trade?

The importance of EU/UK trade is clear from the Leaders’ Joint Statement, which had a strong focus on trade in the context of a new Strategic Partnership. 

In particular, the Joint Statement confirms the EU and UK’s shared principles of ‘maintaining global economic stability and our mutual commitment to free, sustainable, fair and open trade, in line with our shared values, as well as noting the importance of cooperation with all of our trading partners in safeguarding our supply chain resilience and monitoring trade diversion.’

Probably the most significant development from a trade perspective is the sanitary and phytosanitary (SPS) agreement that was reached between the UK and the EU. 

This should make food and agricultural trade easier (and cheaper), by reducing border checks on goods and removing other administrative barriers. This is likely to be welcomed as an opportunity for UK-based exporters of food and agricultural products.

Secondly, the EU and UK have agreed to ‘explore in detail the necessary parameters for the United Kingdom’s possible participation in the European Union’s internal electricity market, including participation in the European Union’s trading platforms in all timeframes.’ It is expected that this will increase stability and energy security, but also result in lower energy prices. 

Thirdly, the EU and UK have agreed to work towards establishing a link between carbon markets and the respective emissions trading systems, by way of a European Union–United Kingdom agreement linking UK Emissions Trading Scheme and the EU Emissions Trading Scheme.

The EU–UK agreement also contains measures which will have an indirect effect on trade, such as enhanced cooperation on maritime security and safety, which is of course vital for the maritime transportation of goods.

There will also be future dialogue to agree the following measures which are designed to strengthen people-to-people ties, with a knock on impact on trade: (1) entry and temporary stay of natural persons for business purposes, including the sponsorship scheme, (2) a mutual recognition agreement for professional qualifications, (3) a ‘balanced’ youth experience scheme, (4) the association of the UK with the EU Erasmus+ programme, (5) measures to facilitate travel by touring artists, and (6) potential use of eGates for British nationals traveling to and from EU Member States. 

Likewise, businesses are likely to welcome cooperation in competition enforcement in the event of a competition cooperation agreement between the EU and the UK.

The summit did not address all of the various barriers to trade between the EU and the UK, including customs formalities for goods crossing from the UK to the EU Customs Union, divergence between the UK and the EU on product standards, as well as different approaches to digital trade.

As a result, many businesses will continue to find that cross-border trade presents greater challenges (and costs) than domestic trade, with difficulties associated with supply chains and import and export paperwork.

However, the agreement does set the tone for a future EU/UK relationship, which is likely to be welcomed by businesses that engage in international trade, with indications that action will be taken to remove some trade barriers, increase regulatory cooperation, and facilitate some movement of people.