UK-EU Customs Union

Lord Jackson of Peterborough Excerpts

Thursday 29th January 2026 Lords Chamber

[Lord Jackson of Peterborough (Con)]

My Lords, Brexit was a traumatic episode for our Liberal Democrat friends, but it happened in 2016. British people voted to take back control of our economy, our laws and our borders. A way forward was defined by British sovereignty and British interests: a belief in British exceptionalism, and not a cultural cringe to the European Union or an orderly management of decline, as was unfortunately enunciated by the Liberal Democrats. I am glad the Government stated in their manifesto that there would be no return to the single market, the customs union or freedom of movement. Yet the proposals to bring the UK in line with the EU’s electricity market and to reach an SPS agreement threaten to undermine the substance of that promise, which will have calamitous impacts on British farming, according to this morning’s Times.

If the UK aligns with EU rules, it would include targets toward the promotion of renewables and alignment on carbon emissions trading systems. Since leaving the European Union, we have diverged with it on our policies towards energy markets. This included the launch of the UK Emissions Trading Scheme. As of 27 January, the UK ETS carbon trading price was £49.19, while the EU’s ETS was £64.23. Aligning with the EU’s carbon price would raise the cost of industrial carbon for British businesses by more than 30%. The UK already has some of the most expensive energy costs in the world. A dynamic alignment agreement would leave us at the mercy of whatever economic policy mistakes the EU would tie us to. This looks likely, with the EU planning, for instance, to expand its ETS policy in 2027 to include buildings and road transport in the economic activity covered in carbon pricing.

Further integration with the EU would be damaging for British business and industry. It would undermine any innovation in agri-food brought about since the passing of the Genetic Technology (Precision Breeding) Act 2023. We have an advantage over the EU in helping to create food able to withstand future climate and biodiversity challenges. Even the French newspaper Le Monde argued recently that the EU’s common agricultural policy is not sustainable and does not aid in creating robust production practices.

Those who advocate for a customs union fail to grasp that the UK is a far more flexible and dynamic trading partner than we were, or could be, in the EU. When the UK left the EU, we rolled over existing trade agreements to make sure that there was continuity for British business. It has taken the UK less than two years on average since Brexit to negotiate many trade deals. In contrast, the EU takes seven to 10 years on average. In the 10 years before we left the EU, annual customs revenue at the UK border varied between £2 billion and £3 billion—the UK received just 20% of it. Outside the EU, in 2023, that revenue was 100% to HMRC and £5.5 billion. Our deal with Japan could boost UK GDP by £1.5 billion over time and link us more to the Indo-Pacific region, where the UK estimates that 54% of global growth and technological advances will occur between now and 2050, and where NATO estimates that two-thirds of future global wealth will be concentrated.

In conclusion, 80% of British economic output came from the services sector. Services provide the largest part of the UK economy and will likely continue to do so. In 2024, UK exports of services to the EU were up 19% in real terms since 2019. Exports of services to non-EU countries have grown by 23%. UK trade in services has outperformed the G7 average since 2021, and Brexit has been a benefit for the largest part of the UK economy. It is clear that, in the past five years, Britain has set out on a new future where we are free to trade with who we want and make decisions which are best for the British people, not a bureaucracy in Brussels. To go back on this will be an error of the highest magnitude.