By Paul McGrade, Lexington’s Senior Counsel on Brexit 

Jeremy Corbyn’s much-anticipated speech on Brexit has increased the likelihood that the UK may end up in a comprehensive customs union with the EU.

Corbyn’s speech today in Coventry had been widely trailed as the moment Labour would come out in favour of a post-Brexit customs union with the EU. In the end, he broadly did that, with conditions which play to the ‘take back control’ narrative – but which might be negotiable with the EU. Primarily a political manoeuvre, the speech will increase the pressure on the government to change its decision to leave any customs union with the EU, or risk defeat in a Commons vote.

On the headline issue, Corbyn was explicit that a customs union is “a viable option for the final deal.” He framed this in terms of tariff-free trade with the EU, to avoid disrupting supply chains, and to help prevent a hard border in Northern Ireland. Speaking in Coventry, Corbyn stressed the complex nature of modern supply chains and throughout contrasted Labour’s pragmatism on Brexit issues (“the new common sense”) and what he described as Conservative ideological fanaticism. He was perhaps most specific on the Irish border arguments in favour of a customs union: “ensuring there is no hard border is a key priority for Labour, which means there has to be a customs union with the EU.”

This support for a customs union came with important caveats around ‘taking back control’: the UK would need to have “a say” over future EU trade deals, and Labour would not agree to the UK becoming a “passive recipient of EU rules”. He also said that Labour would not accept being part of a renewed TTIP trade agreement between the EU and US. He dodged a direct question from the press afterwards about whether he was demanding a UK veto power over future EU trade deals, suggesting that the UK would negotiate alongside the EU. This emphasis on control is partly political – a response to recent commentary from former Theresa May chief of staff Nick Timothy (on which we recently commented here) which emphasised the need for UK control over its future trade deals to avoid harm to the NHS. But it also reflects Corbyn’s deep scepticism of free trade and globalisation. While the EU would almost certainly agree a strong consultative role over trade deals for the UK as part of a future customs union, and perhaps even a seat at the table, they would not grant a veto power.

More broadly on the UK’s economic relationship with the EU, Corbyn confirmed that Labour would leave the Single Market, but wanted “full access”, and “a floor under existing rights, standards and protections”. He cited a number of areas under State aid, competition and workers’ rights laws where Labour would negotiate ‘protections, clarifications or exemptions’ as part of a new Single Market deal. Most of these could either be accommodated under existing EU rules, or are already agreed in principle (such as changes to the Posted Workers Directive) – which could allow a Corbyn-led government to declare some ‘wins’ in a fresh negotiation with Brussels. Corbyn also said the UK should have the option to remain a part of existing EU bodies, such as Erasmus and Euratom, rather than creating new UK agencies – and should pay to do so, if necessary. On how a new ‘bespoke’ relationship would work with free movement of people, he proposed ‘reasonable management of migration’, and blamed employers rather than migrants for driving down wages. He also confirmed that Labour want to ensure a transition period on existing terms to minimise disruption, a key priority for business.

The immediate reaction from business was favourable. CBI head Carolyn Fairburn tweeted that his “commitment to a customs union will put jobs and living standards first by remaining in a close economic relationship with the EU.” The more Eurosceptic Institute of Directors welcomed Corbyn ‘putting the customs union back on the table’.

How should we see this speech? Many commentators have suggested that it is either an exercise in political opportunism, or a genuine tilt towards a soft Brexit. In fact, the two are compatible – for now, at least. For Corbyn, under mounting pressure from the membership through to Shadow Cabinet colleagues to come out in favour of a softer Brexit, this helps manage his own party. And the real prize for him may be splitting the government, perhaps even precipitating a general election. It is likely that several prominent hard Brexit Ministers would resign rather than accept a staying in a customs union with the EU, should an amendment succeed requiring the government to do just that. Tory Remainer Anna Soubry has tabled such an amendment to the Taxation Bill. The government has paused Parliamentary consideration of the Bill, suggesting that the Whips fear defeat on this point (in fact, it would take around 20 Tory MPs to rebel on this substantive issue, which, the Whips will now argue, is tantamount to bringing down the government).

Despite the caveats, and more than a whiff of having your cake and eating it, Corbyn’s outline Brexit programme would also open the way to a closer economic relationship with the EU than the government’s current red lines allow. Policy principle for Labour Remainers dovetails with short-term political tactics on the customs union issue; it offers the prospect of making the policy weather, if not holing Brexit below the waterline entirely – and splitting the government. Last summer, they, argue, Labour forced the government’s hand by coming out in favour of a standstill transition period. They will hope to do the same on a customs union, and will look for a Parliamentary route to bring the issue to a head soon.

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