EU is 'the biggest prize', Reeves says - as Labour seek closer ties

Chancellor Rachel Reeves has said the government is eyeing "further alignment" with the EU - and that it's a "political argument we can win".

After several fellow cabinet ministers suggested the UK would benefit from rejoining the customs union, Ms Reeves said she and Sir Keir Starmer want to "try and remove barriers for businesses".

While keen to trumpet trade deals the UK has struck with the likes of India and the US, the chancellor declared: "The biggest prize is clearly with the EU, and we have made progress there."

"I'm all up for doing deals with India and the US and Korea, but none of them are going to be as big as what we can get through better trade relations with Europe", Ms Reeves said.

"We trade almost as much with the EU as the whole of the rest of the world combined," she added. "I think further integration will require further alignment.

"But I'm up for that. My government, Keir's government, is up for that."

Leave Brexit alone, says top Tory

Ms Reeves, who was speaking at the London School of Economics on Wednesday, has been accused of seeking to "row back on Brexit" with her ambitions.

Shadow chancellor Sir Mel Stride claimed it was Labour's "poor choices", rather than the departure from the EU the Conservatives negotiated, that had contributed to economic hardship.

The prime minister and chancellor have repeatedly said the government will not rejoin the customs union or single market, but Ms Reeves said: "We were very clear in opposition that we wanted to have better trade relations and a greater degree of trust between the UK and the European Union."

She cited the UK returning to the Erasmus student exchange programme as an example of progress being made, and noted the government is working on an "ambitious Youth Mobility Scheme".

Reeves: 'We can win the argument'

"We want to make Europe as strong as possible," the chancellor said. "That means not pulling up the drawbridge.

"And I know we did that when we voted to leave - not me, the country made that decision… I am confident this is a political argument as well that we can win."

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Last December, Deputy Prime Minister David Lammy said while it was not "currently" policy, it could be beneficial for the UK to consider re-entering a customs union with the EU.

He told The News Agents podcast: "It's self-evident that leaving the European Union badly damaged our economy, took us out of an important marketplace and created serious friction, that untruths were being peddled by those that thought exiting the EU would be a good thing."

Health Secretary Wes Streeting also told The Observer that month that "the best way for us to get more growth into our economy is a deeper trading relationship with the EU".

Labour's 2024 general election manifesto set out three so-called "red lines" regarding the EU. It stated: "There will be no return to the single market, the customs union, or freedom of movement."

(c) Sky News 2026: EU is 'the biggest prize', Reeves says - as Labour seek closer ties