Sir Ed Davey will call for the UK to seek to rejoin the EU customs union to help protect the economy amid concerns about potential trade tariffs under Donald Trump’s incoming US administration.
In his first major speech of the year, the Liberal Democrat leader will urge the Labour Government to negotiate a new agreement with Brussels which has at its heart a system for goods to move freely between Britain and the bloc.
Sir Keir Starmer has committed to strengthen ties with the EU and said he wants a “better deal” for Britain post-Brexit, but has repeatedly ruled out rejoining the single market or customs union.
Experts have warned that securing fewer trade barriers will be challenging in any event without the UK Government being prepared to offer its own concessions.
But Sir Ed will argue that negotiating a new “UK-EU customs union” is “the single biggest thing we can do to turbocharge our economy in the medium and long term”.
He is expected to say: “The UK must be far more positive, far more ambitious, and act with far more urgency.
“That is why, today, I am calling on the Government to negotiate a brand-new deal with the EU this year.
“Not just tinkering around the edges of the botched deal the Conservatives signed four years ago, but negotiating a much better deal for Britain, that has at its heart a new UK-EU customs union, to come into force by 2030 at the latest.”
The Lib Dem leader will add: “It would be a win-win for our country, and I still can’t understand why the Government continues to rule it out.”
Sir Ed will call on ministers to negotiate a new deal with the EU this year, with the goal of forming a customs union no later than 2030 in order to help the UK “deal with President Trump from a position of strength, not weakness”.
He will then accuse Conservative leader Kemi Badenoch of wanting to go “cap in hand” to the US president-elect and “beg for whatever trade deal he’ll give us”, and Reform UK leader Nigel Farage of “licking his boots” and being “more interested in advancing Trump’s agenda” than in the UK’s interests.
It comes after a week of turmoil in the financial markets which has seen the value of the pound drop sharply and the cost of borrowing rise to decades-high levels, indicating weaker confidence in the economy.
Ministers were offered some respite on Wednesday morning as yields on government bonds, also known as gilts, eased shortly after markets opened, while official figures showed inflation unexpectedly fell last month.
Story continues
The rate of Consumer Prices Index inflation fell to 2.5% in December from 2.6% in November, the Office for National Statistics said.
The 30-year gilt yield dropped about five basis points to 5.4%, and the 10-year gilt yield was also down about five basis points to 4.84%.
There are also concerns about Mr Trump’s threats to impose global tariffs on US imports and the potential damage to economies internationally.
On the UK’s relationship with the US under Mr Trump, Sir Ed is expected to say: “How do we deal with Trump from strength? The answer is to show we are not so reliant on the United States.
“That the UK has alternatives, and won’t be bullied into taking whatever Trump offers us.
“We can rebuild our crucial relationship with Europe so much faster.
“That is how we can protect our economy, defend European security, and deal with President Trump from a position of strength, not weakness.”
A Government spokesperson said: “We are resetting the relationship with our European friends to tackle barriers to help drive investment and growth.
“This Government was clear in the manifesto, that we will not re-open the divisions of the past and there will be no return to the customs union, the single market or freedom of movement.”
The Conservative Party and Reform UK have been contacted for comment.