Rachel Reeves will pin her hopes on growing the economy through closer links with Europe as she pledges to undo the damage caused by Brexit.
Officials are working on a major audit of all sectors of the economy to identify industries that could benefit by aligning themselves more closely with European regulations to reduce red tape for exporters.
The chancellor will make her case in her Mais lecture at Bayes Business School, University of London, after she told The Times at the weekend that it was one of three “bets” on economic growth, alongside investment in artificial intelligence and bolstering regional growth.
She said: “Brexit has not been good for our country, for growth, for prices in the shop. It’s almost ten years since we voted Leave. That ship has sailed but there’s an awful lot we can do to improve our trading relations. Where that requires alignment in our national interest, we should absolutely align.”
She will commit Britain to the “fastest AI adoption in the G7”, with £1 billion worth of investment in a new generation of powerful computers based on quantum physics.
“In this changing world, Britain is not powerless. We can shape our own future. Our method is stability, investment and reform — through an active and strategic state,” she will say.
times photographer jack hill
“Today, I am making three big choices on the greatest growth opportunities for Britain in the decade to come: growth in every part of Britain, AI and innovation, and a deeper relationship with the EU.”
Ministers are examining several areas for closer co-operation with the bloc, including chemicals and aerospace, where there are duplicate regulatory regimes that impose additional costs on business. They hope to begin negotiations at a summit with the EU this summer around the tenth anniversary of the Brexit vote.
However, there are significant sticking points, not least demands from Brussels that the UK pays into EU budgets. Some member states, including France, are reluctant to allow Britain sector-by-sector access to the single market, privately accusing the government of “cherry picking”.
The summit is expected to sign off on the first wave of post-Brexit EU alignment, in which Britain will automatically follow EU rules on food and agricultural standards in return for Brussels scrapping checks on UK exports to the bloc.
Ministers are pursuing a youth mobility deal, in which young people from the EU could come to live and work in the UK and vice versa. In an interview with The Times, Reeves refused to say whether the scheme would be capped, saying it was a matter of “live negotiation”.
The EU is demanding that Britain lower tuition fees for those coming to the UK to study in exchange for the deal. Before Brexit, about 64,000 EU citizens attended British universities every year, paying the same fees as UK students. The number fell to about 28,000 students in 2024. They now pay up to three times more than domestic students for their courses.
Leave supporters on Westminster Bridge in London in the days before the referendum in 2016Guy Bell/Alamy Live News
Ministers say they will not compromise on fees after universities said charging European students the same fees as British students would cost the sector more than half a billion pounds.
The EU is pursuing a “Made in Europe” agenda, which aims to protect its industries from unfair international competition in the face of subsidies and tariffs. It is considering content rules that would require up to 70 per cent of components in the goods it makes to be of EU origin. It is also looking at new rules on sustainability, capping foreign direct investment and procurement. The UK is lobbying Brussels for all British components to be treated as European.
Peter Kyle, the business secretary, said last month: “We have a shared challenge on the continent of Europe about economic security.” He added that Europe should “come together” to build “resilience” at a time of increasing worldwide economic tensions.