Rejoining the EU single market won’t boost Britain’s growth

In his speech in Munich on Saturday, the Prime Minister, Sir Keir Starmer, made it very clear that he was planning to rejoin the European Union’s single market, perhaps as early as this year. The argument in favour of this is that it will boost growth – and it will put Britain at the heart of a defence-fuelled industrial revival. But there is just one problem: joining the single market won’t do anything to improve Britain’s failing economy and may well make it worse.

Sir Keir has gone further than any of his colleagues in embracing the EU. Instead of just joining the European customs union, he now wants to align fully with the single market. Very soon he may well be campaigning to rejoin the bloc completely.

He is, however, kidding himself if he thinks that will do anything to boost growth. There are three main reasons for that. First, although it seems to have escaped his famously forensic mind, the EU’s economy is in even worse shape than our own. Under a blizzard of tax rises, the Office for National Statistics estimates that British growth fell to just 1.3 per cent last year, but that was still a faster rate of growth than France and Germany. Even the EU itself now admits it is falling behind the US and Asia. It is hard to understand how joining a lower growth bloc can help boost growth.

Next, the UK already has access to the single market without joining it. The existing trade agreement allows British companies to sell across Europe free of tariffs and quotas, subject to certain conditions. The only difference rejoining would make would be to make them subject to all its rules instead of being free to choose which ones to follow. Given that many of the rules destroy growth, it is hard to see how that helps.

Finally, rejoining the single market would mean yet another round of disruption. It would mean months, if not years, of haggling over rules, terms and, most of all, budget contributions. At the same time, it would risk Britain having to pull out of our trade agreements with the rest of the world. Investment in Britain fell significantly after we decided to leave the EU. It fell even further after the election of the Labour government. One more major upheaval in policy might well finish it off completely.

There was always a respectable argument for staying in the single market after we voted to leave the EU. Its benefits for growth have always been massively oversold, but in fairness, it might have made for a smoother exit. And a campaign to rejoin might galvanise the centrist base (if it actually exists). But it won’t do anything to help the economy – and the Prime Minister is making a big mistake if he thinks it will.