Rachel Reeves attacked the legacy of Brexit in her Mais lecture (Image: PA)

Labour lacks the popular mandate and political courage to reverse Brexit. It knows disaster would await if Sir Keir and Ms Reeves squared off against Nigel Farage and Kemi Badenoch in a new Brexit referendum, so instead the strategy is accept EU rules in return for greater access to markets in a frantic attempt to ignite growth.

Rather than accepting a common rulebook in a few isolated areas, she believes there is sweeping potential in agreeing wholeheartedly to Brussels red tape.

“This will require us to make and win the political arguments,” she said. “Believe me, I’m up for it. Because I believe absolutely that closer alignment is the right course for our country; a course chosen as a sovereign nation, a course chosen in our national interest.”

“If we are to enhance the competitiveness of European industry in the face of global competition, we must work together – remove trade barriers between us, and avoid collateral harm between trusted partners,” she said.

She insists she is not turning “back the clock” but looking “forward to a new and stable future relationship”. But her speech will have left everyone who is disappointed that Britain has not made greater use of Brexit opportunities with a sinking feeling. Her vision for Britain is certainly not making the UK Europe’s answer to Singapore.

The other big idea is to double the funding for Oxford and Cambridge’s development corporations in an attempt to create Europe’s answer to Silicon Valley.

No one would disagree that Britain should make the most of its world-class university cities. But throwing cash at wealthy regions of the United Kingdom is hardly levelling-up. And she announced her plan while also attacking the “fiction” that prosperity can be based on the success of just a few places – an apparent contradiction.

One element of the Chancellor’s proposals could have major consequences. She wants regional leaders to have “control over a share of some national taxes”, with the “proceeds of growth benefiting the places that generated that growth”.

Ms Reeves, MP for Leeds West and Pudsey, knows that Britain is hideously reliant on the wealth of London and the southeast. And she wants the country to “back Manchester and Liverpool and Leeds to match and overtake Stuttgart, Turin, and Lyon” – but right now her Treasury is straining to balance the books.

America’s prosperity has been powered by opening up new home-grown energy sources and the remarkable economic growth of cities such as Austin, Texas. For all her good intentions, Ms Reeves’s speech did not read like a recipe for a similar renaissance in Britain.

For months, financial commentators have fretted about the risk of an Artificial Intelligence “bubble” bursting, but Ms Reeves’s Treasury plans to invest £500million backing British AI companies. Those with long memories will shudder at the thought of Whitehall “picking winners”, as it used to be called.

But Ms Reeves loves the idea of an interventionist Government and is a rebel against the “doctrine of the passive state”. If her big bets deliver big wins the whole country will prosper. If the gamble fails, however, then the Government will have another fiasco on its hands.

The war in Iran compounds Reeves’s difficulties after the economy failed to grow in January (Image: Getty)

She won warm applause from the academics and business figures in a warm room in central London, but on the frontline of the economy many businesses are in a battle for sheer survival.

The reality is that one of the greatest threats to multitudes of companies in the UK – regardless of whether it is a steelworks, a fish and chip shop or an AI data centre – is Britain’s punishingly high energy costs, and these have the potential to get much worse if the crisis in Iran escalates.

Ms Reeves presides over national finances which are as precarious as one of those towers of wooden blocks that families build after Christmas dinner. Making commitments to spare motorists a hike in fuel duty has the potential to spook markets. Labour is facing calls from trade unions, the Tories, Reform UK and the oil and gas industry to u-turn and allow a new era of North Sea extraction, as the world lurches into an energy crisis. But Sir Keir knows there would be fury on the eco-Left – represented at his cabinet table by Energy Security Secretary Ed Miliband – if he announces that it is time to take a new approach on net zero, and makes lower bills and energy independence a national priority.

The grim backdrop to the Chancellor’s speech is that weaknesses in Britain’s military defences are now glaring. But without a major acceleration in growth, there is scant chance of true rearmament.

The Chancellor is right to champion the technologies of the future and to aspire to make the country a global leader in quantum computing, but if the UK cannot protect its borders and its people then it faces an existential crisis.

Rachel Reeves Is Attacking Brexit in a Desperate Bid to Hide the Crisis She Caused

Rachel Reeves has come under renewed political fire over her decision to put Brexit and Britain’s relationship with the European Union at the centre of her economic argument, with critics accusing the Chancellor of using the legacy of leaving the bloc to explain problems facing the economy under Labour.

The criticism comes as Reeves continues to argue that Britain’s departure from the EU created significant economic costs and that closer trading relations with Europe could help improve growth.

Her opponents, including politicians and commentators critical of Labour’s economic record, have questioned whether Brexit should be given such prominence when assessing the government’s own decisions on taxation, public spending, investment and economic policy.

The dispute is becoming increasingly important because the government has made stronger economic cooperation with the EU a central element of its growth strategy.

Reeves has repeatedly linked Brexit to Britain’s economic problems

Reeves has been increasingly explicit about the economic consequences she believes followed Britain’s departure from the European Union.

In a June 2026 parliamentary exchange, the Chancellor said the economic impact of the post-Brexit relationship was “stark” and referred to studies suggesting that Brexit could have reduced UK GDP by as much as 8%. She argued that closer economic ties with Britain’s European neighbours were increasingly important during a period of global uncertainty.

That argument is not simply a Labour political claim.

The Office for Budget Responsibility’s latest Brexit analysis assumes that the post-Brexit UK-EU trading relationship will reduce long-run productivity by around 4% compared with remaining in the EU. The OBR attributes this largely to increased non-tariff barriers to trade.

The House of Commons Library similarly says there is a broad consensus among economists that Brexit has left the UK economy smaller than it otherwise would have been, although estimates of the precise effect vary considerably.

Its review of research found estimates ranging from roughly 2% to 8% of GDP, depending on methodology and assumptions.

That evidence gives Reeves a substantive economic basis for discussing Brexit.

However, it does not settle the separate political question of how much responsibility should be assigned to Brexit compared with decisions made by successive UK governments.

Critics say Labour must own its own economic record

That is where the political dispute becomes sharper.

Critics of Reeves argue that Labour inherited a difficult economy but has also made its own choices since taking office.

Those choices include taxation, public spending, borrowing rules, business regulation and decisions over investment.

The government’s defenders point to the difficult economic conditions it inherited, including weak productivity growth, high borrowing costs and pressures on public services.

Reeves herself has repeatedly described the economy she inherited as suffering from weak growth and difficult public finances.

In her 2026 Mansion House speech, she argued that the government had inherited “anaemic economic growth”, rising interest rates and a cost-of-living crisis. She said her first Budget had repaired the public finances and that subsequent measures were designed to support growth and reduce pressures on households.

The argument therefore has two distinct elements.

One concerns what happened to the British economy because of Brexit.

The other concerns what the Labour government itself has done with the economic circumstances it inherited.

Those questions should not automatically be treated as the same thing.

The evidence on Brexit is broader than one political argument

New research published by the Centre for European Reform in June 2026 has added fresh evidence to the debate.

Its modelling estimated that Brexit had reduced UK exports to the EU by around 12% and imports from the EU by around 16%, compared with a scenario in which the UK had remained a member.

The organisation concluded that the majority of the estimated trade effect came from leaving the EU single market rather than from leaving the customs union.

The study also estimated that the effects extended beyond trade itself because weaker trade can affect productivity and national income.

However, the report is a modelling exercise rather than a direct measurement of an observable alternative Britain. Its estimates depend on assumptions about what would have happened had the UK remained inside the EU.

That limitation applies to much of the Brexit economic debate.

There is no real-world control group in which Britain remained in the EU while everything else — Covid, the energy crisis, the war in Ukraine, global inflation and other events — happened exactly as they did in the UK.

As a result, estimates of Brexit’s economic impact necessarily involve counterfactual analysis.

Reeves wants closer ties rather than simply reopening the Brexit question

The government’s current position is also more nuanced than simply seeking to reverse Brexit.

Reeves has argued that Britain should improve its trading relationship with the EU while remaining outside the bloc.

In a December 2024 speech, she described the government’s “reset” with Europe as an effort to reduce barriers to trade, expand investment opportunities and improve economic cooperation.

That approach has continued.

The government’s negotiations with Brussels have included areas such as sanitary and phytosanitary arrangements and emissions trading.

A 2026 parliamentary research briefing said the government estimated that the SPS and ETS agreements could add nearly £9 billion to the UK economy by 2040, equivalent to around 0.3% of GDP. It also noted that the Office for Budget Responsibility considered it too early to quantify the economic effects of deals still being negotiated.

This distinction is significant.

The government is not currently proposing to rejoin the single market or the EU. Instead, it is seeking sector-specific agreements intended to reduce some of the barriers created by the post-Brexit relationship.

The political argument over “blaming Brexit”

For opponents of Reeves, however, the continued emphasis on Brexit can appear politically convenient.

They argue that Labour should be judged on its own record rather than continually referring back to decisions made years earlier.

That criticism is particularly relevant when discussing tax rises, living standards and public finances.

But the counterargument is that economic policy does not operate on a four-year or five-year reset button.

Long-term changes to investment, trade relationships, productivity and business costs can continue to affect governments long after the original decisions were made.

The Institute for Government noted in March 2026 that Reeves had made closer relations with the EU one of her priorities for unlocking economic growth, but also argued that government rhetoric had moved faster than concrete progress in delivering the promised reset.

That suggests another issue for Reeves: even if Brexit has imposed economic costs, closer EU relations will not automatically remove them.

The risks of closer alignment

There are also trade-offs involved in the government’s strategy.

Closer alignment with EU rules can reduce some barriers for British businesses trading with Europe.

But it can also limit the UK’s ability to diverge from European regulations.

The parliamentary briefing on the government’s EU partnership agenda highlighted precisely this issue, noting that closer alignment could remove trade frictions while potentially creating costs associated with adopting EU rules and limiting regulatory choices.

This means the debate is not simply between “Brexit” and “economic growth”.

The actual policy choices involve questions about regulatory autonomy, trade barriers, business costs, market access and the UK’s relationship with European institutions.

A difficult political message for Labour

For Reeves, the challenge is therefore to demonstrate that acknowledging Brexit’s economic effects is not being used as a substitute for explaining the government’s own economic decisions.

The evidence indicates that Brexit has had measurable effects on Britain’s trade relationship with the EU. The precise size of the overall economic impact remains disputed, but official and independent analyses generally conclude that the economy is smaller than it would otherwise have been.

At the same time, Brexit cannot by itself explain every weakness in Britain’s economy.

The Institute for Fiscal Studies has previously identified a combination of factors behind Britain’s long period of weak growth, including low investment, policy mistakes, political instability, the financial crisis, Covid, the energy-price shock and Brexit.

That broader picture makes simple political explanations difficult.

The next stage of the Brexit debate

The argument between Reeves and her critics is therefore likely to continue.

For the Chancellor, Brexit is relevant because the UK’s trading relationship with its largest nearby economic bloc affects investment, exports, imports and productivity.

For her critics, the government’s responsibility is to explain what it is doing now to improve growth and living standards rather than relying too heavily on decisions made before Labour came to power.

Both issues can be examined simultaneously.

Britain’s economic difficulties have multiple causes, and Brexit is one part of that story rather than a complete explanation for every current problem.

The government’s closer-EU strategy will ultimately be judged not only by its political rhetoric but by whether the agreements it negotiates reduce practical barriers for businesses and contribute to measurable improvements in trade and economic performance.

For Reeves, that makes the next phase particularly important. If closer European cooperation produces tangible economic benefits, the government’s argument that Brexit imposed costs will gain additional practical relevance. If the benefits prove modest, critics will have stronger grounds to question whether the strategy has delivered enough to justify the political emphasis placed upon it.

For now, the evidence supports a more complicated conclusion than either side’s strongest political rhetoric. Brexit has imposed measurable economic and trading costs according to official and independent studies, while the performance of the current government must still be assessed on its own decisions and results.

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