The UK government is increasingly concerned that more protectionist policies pursued by the European Union could exclude British companies from supply chains in key sectors, derailing a reset in post-Brexit relations and potentially costing firms billions of pounds.
Prime Minister Keir Starmer’s administration is lobbying the EU against restricting market access for British firms under the bloc’s “Made in Europe” initiative, according to people familiar with the matter, who spoke on condition of anonymity about sensitive bilateral relations. Neither the UK government nor the European Commission immediately responded to requests for comment on Monday.
Possible moves being discussed within the EU have the potential to disrupt EU wide supply chains in a way that would be particularly damaging for car manufacturers that have sites in both Britain and Europe, such as Stellantis, Volkswagen, BMW and Ford, according to the people. The development has become the focus of UK-EU discussions behind the scenes in recent weeks, they said.
“The question for the UK is not just whether it will receive preferential treatment under new ‘Made in EU’ rules, but also how that treatment will stack up against other EU trade partners such as Japan, Turkey and Switzerland,” said Sam Lowe, partner at Flint Global. “The worst of all worlds would be for UK companies to lose out against both EU competitors and competitors from elsewhere.”
The fresh concerns have informed Starmer’s emphasis in recent months on a drive to take the UK closer to the EU’s single market, one person said. The development comes as the European Commission’s trade and economy chiefs, Maros Sefcovic and Valdis Dombrovskis, visit London on Monday for meetings with EU Relations Minister Nick Thomas-Symonds, Chancellor of the Exchequer Rachel Reeves and Business Secretary Peter Kyle.
“I do think we can go further,” the prime minister told reporters while visiting China last week. “There are other areas in the single market where we should look to see whether we can’t make more progress.”
Britain is urgently trying to dissuade the European Commission and EU member states from pursuing a course it fears could hurt both sides, the people said. Weakening UK-EU supply chains in advanced technology would be against the interests of both, damaging cooperation in a vital field and risking aiding competitors, they added.
The EU has been considering a range of proposals to promote the use of goods and services produced within the bloc, in response to President Donald Trump’s tariffs and wider geopolitical and trade uncertainty. That’s been most evident in its steel industry, which European Commission President Ursula von der Leyen has sought to protect with tariff increases and tightened quotas on foreign steel.
The commission’s proposals for the Industrial Accelerator Act, which have been delayed until later this month, are expected to set further requirements for goods in sectors including cars and green technology to be EU-made in order to receive certain subsidies.
There is a discussion inside the European Commission about whether its industrial policy should be “made in the EU” or whether to broaden the concept to better reflect the cooperation with like-minded partners, one person familiar with the matter said. The UK is pushing for the latter.
Britain is concerned that exclusion from the Made in Europe initiative would disrupt UK-EU supply chains, including those for automakers, the people said. Tech and green-energy companies could also be impacted, they added, noting that the UK imports wind turbine parts from the EU and exports heat pump technology to the continent.
Any outcome that damaged UK-EU supply chains would increase costs and uncertainty for businesses on both sides, one of the people said, so it was in their mutual interest to consider the UK’s position as a leading trade partner of the bloc.
The person warned that penalizing British firms with protectionist policies triggered by trade threats from the US and China risked being in breach of the post-Brexit Trade and Cooperation Agreement and the commitments made between the UK and EU at a summit last year.
The discussions highlight the vulnerabilities faced by the UK since it voted to leave the EU nearly a decade ago. Outside of the bloc, Britain has little protection in the event of a global trade war and is reliant on negotiating favorable ongoing trading terms with Brussels, something which may result in further concessions from London.
Starmer still wants the UK to join the European Union’s flagship €150 billion ($178 billion) defense fund, even after talks to do so broke done last year in a disagreement over how much Britain would pay for access. The UK had wanted its firms to benefit from the fund, which allows countries to apply for funding to purchase military equipment.
“Whether it’s SAFE or other initiatives, it makes good sense for Europe in the widest sense of the word — which is the EU plus other European countries — to work more closely together,” Starmer told reporters on his Asia trip. “That’s what I’ve been advocating and I hope to make some progress on that.”
