Gareth Thomas MP argues that the Labour government should make an ‘ambitious new offer to the EU’, using the EU’s updated agreements with Switzerland as a precedent, originally published by UK in a Changing Europe.

The ten-year anniversary of the EU referendum produced a wave of commentary refighting old battles – from Brexiteers’ excuses for wiping 4%-8% off our GDP, to musings about Labour’s chances at the next general election if we promise to rejoin.

Yet the debate in Westminster is lagging behind the public, who mostly see Brexit as a failure, but are not keen to re-run the divisions of Leave vs Remain. It is also disconnected from the real-world problems that we and our European neighbours face.

The reality of Brexit is that the EU is taking big decisions without the UK being in the room. Our car industry is being shut out of the EU’s ‘Made in Europe’ scheme for electric vehicles. Our steel industry, where 78% of exports go to Europe, now faces doubled EU tariffs. Our defence companies are not eligible to lead projects funded by the EU’s €150bn SAFE defence loan scheme.

This is not because the EU is trying to ‘punish’ us. This government has done the hard yards in restoring trust with our neighbours. Instead, it is the simple consequence of having left the single market, which the EU’s system is set up to protect. That’s why although the ‘reset’ has achieved some positive improvements, we need a fundamentally new deal with the EU that goes beyond incremental changes.

This ambitious partnership should have three main priorities: defending Europe in the face of Putin’s war in Ukraine and Trump’s disdain for NATO; responding to a disrupted global trading landscape dominated by the US and China; and planning for a future shaped by technologies, including AI, where Europe currently lags behind and where leading companies may not have our best interests at heart.

On security and technology, the UK has plenty to offer. We are a nuclear-weapons power with highly professional armed forces, top-tier intelligence services, and capabilities that Europe lacks. The UK attracts 39% of total venture capital in Europe, of which three quarters is in AI; we are a leader in biotech, accounting for 30% of the European VC market; and we are second globally for investment in fintech.

When it comes to trade, our position is unsustainable. Post-Brexit trade deals – worth only around 0.4% of GDP – cannot repair the damage caused by leaving the single market. Manufacturers in constituencies like Makerfield face what the OBR calls a ‘structural challenge’ from the paperwork and costs keeping us out of European supply chains. Our goods exports to the EU have fallen by 16%. In services, we no longer have mutual recognition of professional qualifications, and reduced business mobility throttles innovation.

We are close to agreeing important deals on agrifood and emissions trading. But these agreements, worth about 0.3% of GDP, are not game-changing for the economy as a whole. And the EU has made clear that our red lines on the single market, customs union and freedom of movement rule out substantially lowering trade barriers.

So what can be done? Our ambitious new offer to the EU should play to our strengths, while making a step-change in our integration with the single market. The precedent for this new trading relationship was set last year in the EU’s updated agreements with Switzerland, which is almost entirely inside the single market for goods, and partially aligns on services. In return, Switzerland pays into the EU’s regional levelling-up funds, and has an agreement on movement of people.

The UK is not Switzerland, and we could not simply copy and paste their deal. But this kind of arrangement could add up to 2% to GDP – boosting industries such as chemicals, pharmaceuticals, automotives and machinery – while giving the EU a partner with a clear stake in the single market’s success for the first time since 2016. It could preserve areas of divergence where an immediate return by the UK to the single market might be challenging, such as financial services or AI. And it would keep the UK’s ability to negotiate trade deals outside of the EU customs union.

On movement of people, this kind of deal would clearly be in UK interests. Total freedom of movement, with anyone from any EU country able to come to the UK whenever they want, whatever their circumstances, and settle here, is never going to be acceptable. But that doesn’t mean every restriction on movement between the UK and Europe should remain. It’s right that we’re negotiating an agreement to allow young people to live and work in each other’s countries for a limited period.

Scare stories about uncontrolled free movement show a complete misunderstanding of the controls that are applied to EU migration. For Switzerland – keen not to open up access to its generous benefits system – the EU deal was designed to apply only to the economically active.

EU citizens moving to Switzerland for more than three months need a residence permit and health insurance. To qualify, they must show either proof of employment, or evidence that they will not rely on benefits. The Swiss government can suspend free movement if it is shown to be causing “serious economic or social problems”.

A flexible labour force is good for UK businesses, and restoring the right to work in the EU would help Brits of all backgrounds. Lorry drivers would no longer face the 90-in-180 days limit that damages our logistics industry and leads to offshoring of jobs. Machinery manufacturers could more easily send staff for servicing and repair. Musicians in emerging British bands could tour in Europe, after years of being hammered by Brexit red tape.

The debate has moved on from 2016: polls consistently show that around three fifths of the British public would support free movement with the EU. And a referendum in Switzerland aimed at capping the population and bringing down the EU deal was voted down last month.

None of this will be easy to negotiate with our European partners, and a new Prime Minister will need to show courage in setting out renewed ambition. But staying on our current path is not an option. The Brexit referendum caused us to look inwards for a decade, as the world outside passed us by. To rise to the challenge of the decade to come, we need a new partnership with the EU – and the task of building it begins now.

By Gareth Thomas, Labour and Co-operative MP for Harrow West, and formerly Parliamentary Under-Secretary of State at the Department for Business and Trade.