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uly the 4th marked a pivotal moment in recent United Kingdom (UK) politics. After 14 years of Conservative rule, Keir Starmer’s Labour Party secured a decisive parliamentary majority, returning to power at Downing Street. However, the victory was more complex than it initially appeared. Record levels of abstention underscored growing public disillusionment with representative institutions. Meanwhile, Reform UK, led by Nigel Farage, captured an unexpected 14 percent of the vote. Despite winning few seats due to the first-past-the-post system, the party’s performance revealed the enduring appeal of a radical, populist message and posed a serious threat to the Conservative Party’s electoral base.

Labour’s return to power also came with the lowest vote share for a winning party in UK history, suggesting that discontent with the Tories—fueled by scandal and fatigue—played a larger role in their defeat than active support for Labour’s platform. This lukewarm backing could test the new government’s resilience, especially as it faces difficult decisions in a fraught economic context. Years of austerity have strained the UK’s social and productive fabric, leaving the economy vulnerable.

 

The first major economic package introduced by the new government has already drawn criticism for its sharp tax increases, amounting to around GBP 40 billion—one of the largest percentage hikes in recent memory.

Compounding these domestic challenges are international crises, notably in Gaza and Ukraine, which further restrict the new government’s room for manoeuvre. Global inflationary pressures driven by the war in Ukraine have fueled price increases at home, pushing inflation to its highest level since the 1980s. The lingering effects of Brexit and the Covid-19 pandemic have only deepened the economic strain. Meanwhile, the UK’s steadfast support for Ukraine requires additional financial and logistical commitments, stretching already limited resources.

Labour’s early months in power have been marked by inconsistency and missteps. Minor controversies and scandals have chipped away at Starmer’s personal popularity and cast a shadow over his government’s early tenure. As the administration grapples with domestic and international pressures, its ability to maintain public trust and deliver on key promises will be crucial to its long-term stability.

 

Reset or restraint?

One recurring theme in Labour’s electoral campaign was the promise to inaugurate a new chapter in UK-European Union (EU) relations following the tensions sparked by the Brexit referendum and subsequent negotiations over an agreement acceptable to London and Brussels. Currently, relations are governed primarily by two instruments: the Trade and Cooperation Agreement (TCA) and the Brexit Withdrawal Agreement, later supplemented by the Windsor Framework, which amended the Northern Ireland Protocol. The TCA, whose first implementation review is scheduled for 2026, excludes key areas such as foreign and security policy. Despite this, London and Brussels have managed to develop informal cooperation in these fields, particularly following Russia’s invasion of Ukraine, achieving reasonably positive outcomes. However, the growing complexity of international conflicts underscores the need to remove these critical areas from the influence of short-term political contingencies.

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uring the campaign, David Lammy, the incumbent Foreign Secretary, outlined the principles of Labour’s foreign policy under the label of “Progressive Realism,” defined as using realist means to pursue progressive ends. This necessarily entails shifting away from the confrontational approach of recent years towards strategic dialogue with Brussels, which London hopes will lead to joint decisions on shared issues. So far, however, the results have been modest. Starmer has retained the same red lines established by his predecessors—no customs union, no free movement, no Single Market—effectively limiting significant progress on key issues. The few and narrow proposals advanced by the UK, coupled with the refusal of Brussels’ major requests, have produced limited outcomes, creating the impression that this reset is more in style than in substance.

 

Strategic cooperation in energy and climate: unlocking potential

As previously noted, there are strategic common interests that should encourage the EU and the UK to pursue deeper cooperation, particularly in energy and climate—key areas whose importance has often been underestimated. A stronger partnership in these domains could serve as the cornerstone of an effective and fruitful reset in their relations. In these fields, the objectives of London and Brussels appear well-aligned. Labour’s ambition to transform the UK into a “clean energy superpower,” including its goals of decarbonising the electricity grid by 2030 and establishing Great British Energy (GBE), a state-owned clean energy company, aligns with the EU’s climate and energy priorities. GBE aims to end the UK’s dependence on fossil fuels and ensure energy security by investing in clean energy technologies and local energy projects. According to Labour’s goals, the company will focus on offshore wind (including a partnership with the Crown Estate), tidal power, carbon capture and storage, hydrogen, and other emerging technologies—despite the initial funding allocation of £125 million for the next two years being considerably lower than anticipated.

The Trade and Cooperation Agreement establishes mechanisms for collaboration on electricity, gas, and renewable energy.

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hese shared goals could foster a virtuous collaboration, especially in areas less prone to competition between London and Brussels, as decarbonising energy systems will inevitably require cooperation on shared infrastructure. Moreover, both actors are global leaders in climate diplomacy and have opportunities to coordinate in multilateral forums such as COP summits and the G20. Joint initiatives, such as strengthening supply chain partnerships or reforming international financial institutions, could amplify their influence and impact on global climate action.

The Trade and Cooperation Agreement establishes mechanisms for collaboration on electricity, gas, and renewable energy. The TCA also addresses critical issues like infrastructure interoperability, energy trade, and offshore renewable development, especially in the North Seas. Its overarching goal is to promote energy trade and investment while ensuring supply security. To this end, the agreement includes commitments to fair competition, non-discrimination in energy markets, efficient use of interconnectors, and coordination between system operators.

 

 

 

While these provisions have maintained cross-border energy flows—enabled by ten shared gas and electricity interconnectors—the arrangement is not without challenges. The temporary nature of the TCA’s trading arrangements has discouraged UK and European companies from making long-term clean energy investments. Political roadblocks have further stalled progress on binding agreements. UK policymakers are reluctant to align with EU legislation, while EU officials aim to avoid granting preferential treatment to a non-member state.

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nother key obstacle is the UK’s inability to use EU Single Market mechanisms like Market Coupling, which has led to higher costs and inefficiencies. Regulatory divergence and the absence of a comprehensive framework for energy security, including mechanisms to handle gas supply crises, present further risks.

The situation in Northern Ireland is especially fraught. Northern Ireland remains part of the single electricity market shared with Ireland, raising the possibility of regulatory disputes over whose rules should apply if EU and UK energy policies diverge. This regulatory limbo poses a significant challenge for the island’s energy stability and security.

The EU and UK share a commitment to achieving net-zero emissions by 2050 and upholding the Paris Agreement goals. While the TCA guarantees non-regression in environmental standards, it stops short of providing mechanisms for deeper climate policy coordination. So far, collaboration has been constructive but limited, centering on shared ambitions rather than aligning policies or regulations. Key issues, such as renewable energy expansion and supply chain resilience, remain unaddressed.

A prime example is the development of separate carbon border adjustment mechanisms (CBAMs), with the EU’s already in place and the UK’s set to launch in 2027. These mechanisms impose a carbon price on imports that aren’t subject to comparable domestic carbon pricing. One potential solution would be linking the UK and EU emissions trading systems (ETS), which could exempt each side from each other’s CBAMs. Such a move would lower costs, reduce trade frictions, and prevent the imposition of new tariffs.

 

The limits of the Trade and Cooperation Agreement

Cooperation between the EU and UK on energy and climate issues could be significantly strengthened, both within and beyond the framework of the Trade and Cooperation Agreement. The upcoming 2026 review of the TCA presents a key opportunity to address existing gaps and enhance collaboration in three critical areas: energy security, energy trade, and climate diplomacy. Given the TCA’s current limitations in these fields, there is substantial room for improvement.

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he TCA falls short of comprehensively addressing energy security and green transition technologies, leaving gaps in regulatory alignment and supply chain coordination. Greater cooperation on critical materials for renewable technologies and harmonizing regulations could accelerate the green transition on both sides.

The North Sea is poised to become a cornerstone of Europe’s energy strategy, with its offshore wind resources projected to meet up to 45 percent of electricity demand in bordering countries by 2050. Strengthening cooperation and political dialogue between the EU and UK is essential to fully harness this shared resource. This includes developing robust electricity infrastructure and ensuring its physical protection—both crucial for securing the region’s energy future.

On trade, dormant commitments under the Trade and Cooperation Agreement could be reactivated to improve energy trading efficiency and link emissions trading schemes. Such measures could reduce costs by an estimated €13 billion, driven by more efficient energy trading and better integration of renewable energy sources.

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n climate policy, the EU and UK should collaborate on the global stage to address key diplomatic challenges. This includes advancing climate action plans ahead of COP30, pushing for reforms of international financial institutions, and strengthening international alliances. Effective cooperation requires leveraging multilateral platforms like the COP and newer initiatives such as the European Political Community (EPC), which could serve as strategic forums for climate diplomacy and the energy transition.

While there have been no major policy shifts in EU-UK relations so far—beyond a notable improvement in diplomatic tone—energy and climate offer a promising starting point for strategic cooperation. Success will hinge on the political will to create structured frameworks and capitalize on shared interests, fostering a more resilient partnership.

The UK Labour Party’s ambitions align closely with the EU’s goals, opening opportunities for joint efforts on energy security and climate diplomacy. New forums, such as a proposed UK-EU security pact, could incorporate energy and climate dimensions, enabling strategic dialogue and joint initiatives to maximize the potential of their collaboration.