With the UK’s ‘reset’ with the EU ongoing, there is concern within the bloc that regulatory alignment could be reversed following the next UK election. Brussels is also looking ahead to the presentation of a new Digital Networks Act next week, while US inflation rate data could hint at the effect of tariffs in the year ahead.
EU seeks ‘Farage clause’ in reset talks
The EU is to demand compensation from the UK government should Nigel Farage’s Reform UK prevail at the next general election and reverse prime minister Sir Keir Starmer’s Brexit ‘reset’ measures, according to an FT report.
Brussels could seek the clause as part of a proposed agreement to align standards on veterinary or sanitary and phytosanitary (SPS) goods. It would require financial compensation to be paid by a future UK government covering the costs of “the infrastructure and equipment” and “initial recruitment and training” required to implement an SPS deal should a Reform government choose to ditch it.
In a post on X, Farage said “we will not honour any clause”:
“No parliament may bind its successor. If Starmer signs this, it is a democratic outrage.”
An EU diplomat said the clause represented a “safety provision to provide stability and a deterrent for Farage and Co”, while a Labour official said it was “standard for agreements to have contingencies for termination and they would work both ways”.
There has been continued talk in the UK over the prospect of closer UK-EU alignment in the form of a bespoke customs union between the two countries, including from senior ministers such as Wes Streeting and David Lammy.
In a Politico feature late last week, some MPs suggested that there was not yet broader support within the Labour Party for the shift. One suggested the idea was “absolutely nonsense” because it would require abandoning recent trade agreements struck with India and the US.
Fergus McReynolds, the Chartered Institute’s director of EU public affairs, says:
"While the final shape of this agreement, including any checks and balances, will be important, the focus should be on how this agreement can remove barriers to trade and support traders to move goods more freely and reduce the cost of doing for high value sectors such as food and drink businesses in both the UK and the EU."
Brussels to spare Big Tech?
Next week (20 January), the EU’s technology head Henna Virkkunen will present the bloc’s Digital Networks Act, which a Reuters report suggests will be more lenient on major US tech firms than previously expected.
Instead of the binding rules which currently affect telecom providers, ‘Big Tech’ companies will only be required to subscribe to voluntary rules. Speaking to Reuters, one official said:
"They will be asked to cooperate and discuss voluntarily, moderated by EU telecoms regulators' group [the Body of European Regulators for Electronic Communications] BEREC. There will be no new obligations. It will be a best practices regime.”
It comes as social media site X has come under renewed scrutiny as a result of sexual deepfakes created with its AI image generation feature.
McReynolds says the act is a "vital step toward creating the resilient digital infrastructure that modern trade depends on".
"Our previous work has consistently shown that strong, interoperable digital networks are essential for competitiveness, reducing friction in supply chains, and enabling businesses of all sizes to participate fully in global markets."
US inflation
There will be fresh inflation data out of the US this week as the CPI rate is published for December 2025. Prices rose 2.7% in the year to November, though this was lower than economists’ expectations of a 3.1% rise.
There was no equivalent data release for the year to October owing to the longest ever shutdown of the US government, after failure in Congress to reach an agreement on spending. This did not hold President Donald Trump back from arguing that he was “bringing those high prices down, and bringing them down very fast”.
There were more concerning numbers for the US government last week when job creation slumped to its slowest pace since the Covid-19 pandemic. Only 50,000 new jobs were added in the year to December, though the overall unemployment rate did dip to 4.4%.
On the growth, the US economy has weathered tariffs and other changes to expand by an annual rate of 4.4% in the three months to September as a result of increased exports and consumer spending.
Other dates for the diary
Monday: German chancellor Friedrich Merz to visit India
Tuesday: Holyrood’s Budget presented by Scottish finance minister Shona Robison
Wednesday: PMQs
Thursday: 25 years since the launch of Wikipedia
Friday: German CPI data published
Saturday: Mamadi Doumbouya’s inauguration in Guinea
Sunday: Portuguese presidential election
