CHATHAM HOUSE Three foreign policy priorities for the next UK government A case for realistic ambition RESEARCH PAPER PUBLISHED 14 MAY 2024

 CHATHAM  HOUSE 

Three foreign policy priorities for the next UK government

A case for realistic ambition

RESEARCH PAPER

PUBLISHED 14 MAY 2024

ISBN: 978 1 78413 606 2

DOI: 10.55317/9781784136062

Olivia O’Sullivan

Director, UK in the World Programme

Email Olivia

Bronwen Maddox

Director and Chief Executive

With a general election imminent, it is already clear that the next UK government will take office in an immensely challenging environment for foreign policy. From wars in Gaza and Ukraine to concerns about climate change, China’s assertive global agenda and the durability of America’s commitment to European security, the next UK government will face many pressing international problems and have limited resources with which to tackle them. This paper examines how the next government – regardless of which party wins the election – could use its foreign policy assets to best effect in the context of fiscal and other capacity pressures.

‘Realistic ambition’ should be the guiding principle, with the UK recognizing its limits and constraints but remaining actively engaged and agile in its foreign policy. The paper outlines, in particular, three long-term priorities for foreign policy: navigating unpredictable great power dynamics that are complicated by rising Sino-US tensions; improving the UK’s relations with the EU, in part to offset the risk of reduced US engagement in Europe, and in part to fill post-Brexit policy gaps; and reinvigorating the UK’s role in global governance and international development, an area of historical strength.

Topics

UK’S GLOBAL ROLE EUROPEAN DEFENCE EUROPEAN UNION (EU) TECHNOLOGY GOVERNANCE US FOREIGN POLICY CHINA'S FOREIGN RELATIONS

Regions

UNITED KINGDOM UNITED STATES OF AMERICA CHINA

Departments

UK IN THE WORLD PROGRAMME

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03 Improving the UK’s relations with Europe

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Three foreign policy priorities for the next UK government

Summary

01 Introduction – the need for realistic ambition

02 Navigating unpredictable great power dynamics

03 Improving the UK’s relations with Europe

04 Strengthening a role in global governance and international development

05 Affording a global role

06 Conclusion

About the authors

Acknowledgments

03 Improving the UK’s relations with Europe

There are many reasons for the UK to improve relations with Europe, from economic interest to offsetting the risk of reduced US support for European security. We advocate many small steps to make the best of UK–EU contacts while respecting the balance of public and political opinion. But the best strategic move should be to reframe relations more around geopolitical and security cooperation.

Europe presents the next UK government with difficult choices. There are many reasons to seek closer relations – economic above all – but the next government will want to respect the results of the Brexit referendum and the enduring Eurosceptic tendency in British politics. It will need, too, to respect the EU’s own difficult choices, notably the familiar ‘broader or deeper’ question about future enlargement.

How can the Trade and Cooperation Agreement be improved?

Sticking with the status quo offers few benefits when the UK badly needs sources of economic growth. The 2020 Trade and Cooperation Agreement (TCA) removes tariffs and quotas, but it creates other barriers to trade – especially in goods – with the UK’s largest market. These barriers include regulatory, customs and rules-of-origin requirements, all of which increase the costs and bureaucracy of doing business. While there is scope for the next government to pursue some improvements to the TCA (see below), these are unlikely to deliver significant economic and strategic benefits. At the same time, bolder proposals outside the TCA for something like a quasi-single market for goods are unlikely to be embraced by the EU.

Some analyses find that the UK’s economic situation is poorer as a result of Brexit. The Office for Budget Responsibility, drawing on external studies, has suggested that UK productivity is likely to fall by 4 per cent relative to what it would have been had the UK stayed in the EU.50 The National Institute of Economic and Social Research estimates GDP may be 2–3 per cent lower than if the UK were still in the EU.51 Admittedly, assessments of economic and trade performance in the past five years are complicated by the effects of the pandemic. Recent revisions by the UK’s national statistics agency suggest the UK economy recovered better from COVID-19, relative to other G7 members, than had previously been assumed.52 But doing better than comparators is not the same as doing better than a hypothetical UK still in the EU. It remains difficult to see how making it costlier and harder to trade with Britain’s most important market could contribute to UK growth. Indeed, some analyses find new trade obstacles with Europe are affecting the UK’s high-productivity manufacturing, causing a drift towards low-productivity sectors.53

Prospects for FTAs with the US or China are limited, and although a UK–India deal might add a slight boost to GDP, few other potential agreements are left that would cover a meaningful share of UK trade.

Nor have the barriers been offset by benefits from FTAs with non-EU countries, even though such deals were touted by some Brexit supporters as part of the rationale for exiting the EU. Prospects for FTAs with the US or China are limited, and although a UK–India deal (see Chapter 2) might add a slight boost to GDP, few other potential agreements are left that would cover a meaningful share of UK trade. The government has nominally finalized over 70 FTAs since Brexit, but almost all of these merely ‘roll over’ terms the UK already enjoyed as an EU member, so these deals will do little to transform the UK’s economic fortunes.54 FTAs also tend to govern goods; they cannot form a core trade strategy for an 80 per cent service-oriented economy like the UK’s, especially when the EU market accounts for nearly half of UK goods exports.55 Put another way, opening new markets to merchandise trade will not add enough to export receipts to offset the increased barriers to trade with the EU.

There are some prospects for reducing trade barriers with the EU without significantly reopening negotiation of the current relationship (which would cost political capital and time – and depend on the EU’s support). The TCA is up for review in 2026, and there is scope to pursue agreement of additional provisions within that process. This could include alignment on controls regulating the trade of animals and plants,56 and mutual recognition of professional qualifications. While such measures would take painstaking negotiation to agree and would be piecemeal in nature,57 they might still be of value to a future UK government seeking incremental wins. Harmonizing professional qualifications, for instance, could improve post-Brexit labour mobility in some sectors.

There are some prospects for reducing trade barriers with the EU without significantly reopening negotiation of the current relationship. The TCA is up for review in 2026, and there is scope to pursue agreement of additional provisions within that process.

Rejoining the Erasmus Plus scheme might enable greater academic exchange. Youth mobility schemes might help ease some labour shortages, while increased sector-specific mobility – for example, for some seasonal workers and performers – could ease barriers that small and creative businesses have encountered. While cooperation of this sort could conceivably be pursued bilaterally with individual EU states, it would be more efficient to add provision for youth and labour mobility to a TCA review; the European Commission has signalled some openness to this.58 Indeed, the commission made an offer in early 2024, but the UK government rejected this, citing the end of freedom of movement with the EU – despite the UK having youth mobility schemes with several other non-EU states.59

Energy and climate are also areas in which the UK could seek stronger cooperation within the TCA. The treaty’s current provisions for the use of shared energy infrastructure expire in June 2026. Expanding commitments to shared energy interconnectors and efficient transfers of energy between the UK and Europe would lower energy costs and strengthen energy security. On climate policy, cooperation could help to tackle the pressing divergence between the UK’s emissions trading scheme and its EU counterpart. As of February 2024, the UK’s carbon prices had fallen significantly compared to those under the EU’s scheme.60 The EU’s carbon border tax regime (also known as a ‘carbon border adjustment mechanism’, or CBAM) makes companies selling into the EU pay the difference between prices under any foreign carbon pricing mechanism and the EU’s, so the fall in UK prices potentially imposes hefty costs on UK exporters.61 The UK is now proposing its own CBAM, covering different sectors and with different reporting mechanisms. The TCA explicitly states that the EU and UK could consider linking their emissions trading schemes in future to ensure they work effectively, and the next government should support this; the longer the two schemes are unlinked, the likelier it is that they will diverge in ways that will be difficult to untangle.62

The European Commission may be reluctant to revise the TCA significantly in 2026, but the above options are at least feasibly in the scope of the review. If implemented, these would address some of the barriers created by the UK’s current trading arrangements with the EU.63 That said, changes to the TCA would not only be time-consuming and challenging to negotiate and implement, but would be largely technical in nature and would not dramatically change the UK’s economic prospects.

More ambitious proposals could, of course, be tabled, short of rejoining the single market or even the EU (something neither major UK political party proposes). Among the ideas floated is a version of the ‘Chequers deal’ proposed by Theresa May’s government in 2018, which essentially advocated regulatory harmonization on trade in goods (not services) and the removal of customs checks between the EU and UK – in this scenario, the UK would have administered EU tariffs and trade policies on goods intended for the EU at the UK border.64 The Resolution Foundation has also proposed a ‘UK Protocol’, which would extend to the whole of the UK the customs and trade arrangements currently available to Northern Ireland.65 This would necessarily involve the UK aligning with EU goods regulations and agreeing a kind of single market focused solely on goods.

While this would make the UK a ‘rule-taker’ on goods – meaning that it would be obliged to follow EU rules without having a say in their shaping – the benefits in reduced trade barriers could be significant. The Resolution Foundation claims that its proposal could boost UK GDP by 1–2 per cent.66 Under the current TCA, the post-Brexit hit to UK GDP is much debated, but one estimate suggests it has already been in the region of 2–3 per cent.67 For comparison, government analysis published in 2018 estimated that the ‘Chequers deal’ might have reduced GDP by either 0.6 per cent or 2.5 per cent (depending on whether migration rules were tightened) over a 15-year timeframe, relative to a baseline of the UK staying in the EU.68 This was substantially less than the estimated 4.9 and 6.7 per cent reductions in GDP, respectively, estimated for an FTA-only deal.

UK public opinion has consistently been positive about EU regulatory standards, but has demonstrated worries about immigration from the EU. Some recent polling finds support for aligning with EU regulations if it makes imports to the UK cheaper.

Public appetite for alignment on goods trade could be significant, provided the UK retains an independent immigration policy. UK public opinion has consistently been positive about EU regulatory standards, but has demonstrated worries about immigration from the EU. Some recent polling finds support for aligning with EU regulations if it makes imports to the UK cheaper.69

But this kind of proposal would be hard to sell to the EU. It would look like an attempt to split the EU’s ‘four freedoms’ (on movement of goods, services, capital and people) by making bespoke arrangements. UK governments have consistently failed to appreciate the EU’s deep commitment to the indivisibility of the single market. May’s Chequers proposal, the closest analogue to a UK Protocol-type arrangement, was never really tested with EU interlocutors because it could not secure support at home in the UK. Advocates of exploring this type of option argue that it is not impossible: if the Windsor Framework (see Chapter 1) and agreements to cooperate on regulatory issues continue to hold, then a less acrimonious relationship might create a foundation for flexibility. Precedents do or could exist. A post-war Ukraine might seek a bespoke agreement with the EU, and Turkey already has a customs union with the EU (although this has been a source of frustration for Turkey because it lacks a say in trade deals between the EU and third countries, yet still experiences the constraints of such deals on its trade because of its membership of the customs union).70

But the European Commission is unlikely to welcome UK attempts to cherry-pick the benefits of closer cooperation when it has many other pressing concerns and has spent years settling the current deal. And while the UK public might not be against a closer relationship per se, the prospect of tortuous negotiations with the EU is unlikely to be popular.

This is where a longer-term view of relations with the EU might benefit the next UK government. Over the next decade, the EU will have to confront the question of enlarging the bloc: because of Ukraine’s bid to accede; because of the EU’s policy to support the gradual integration of the seven western Balkans countries; and potentially because of geopolitical pressures to cooperate on security and defence with countries in the European neighbourhood. This suggests the possibility – long discussed – of a ‘two-speed’ or ‘concentric circle’ model of European integration. Under such a model there would be scope for different types of EU membership to coexist, including perhaps some sort of associate membership. None of this discussion is aimed specifically at the UK. But it could open up a longer-term opportunity for the UK to rethink its relationship with the EU, just as the EU will be doing with a range of countries on its periphery. The next British government could focus on influencing this discussion and finding a space for the UK within it. A good first step, explored in the next section, might be to focus on cooperation now to manage shared geopolitical and security risks.

Geopolitical and security cooperation

The next government should push for greater security and defence cooperation with the EU. The UK’s outsized role in security and defence – in NATO, the UN, and broader European diplomacy and security – means it has something important to offer an EU increasingly concerned about security, Russia and the US’s changing commitment to the continent. The vigorous British response to the invasion of Ukraine has underlined the UK’s importance to European security, as well as its closeness to Poland and the Baltic states in its approach to Russia. In contrast, Germany and France are wrestling with profound questions about their security postures.

The TCA currently provides for only some security dialogues rather than the deeper and more structured foreign policy and defence cooperation envisaged under some of the early Brexit proposals tabled by the May government.71 But Russia’s war on Ukraine has precipitated ad hoc UK–EU security cooperation and a recognition of shared geopolitical challenges. The UK and the EU have coordinated on sanctions against Russia, and in November 2022 the EU admitted the UK to the PESCO ‘Military Mobility’ project – aiming at streamlining the movement of military equipment and troops across Europe.72 (The acronym PESCO stands for ‘Permanent European Structured Cooperation’, a voluntary EU mechanism for deepening defence cooperation among member states.) The significance of the UK’s inclusion in this initiative should not be overstated – the project is still mired in discussion, and formal engagement is still challenging on both sides. But it represents a move towards practical security cooperation where required.

There are opportunities for the next government to formalize more of this sort of cooperation. The UK could pursue an administrative arrangement with the European Defence Agency (EDA), similar to the agreements in place for Norway, Switzerland and Ukraine, allowing the UK more consultation, visibility and involvement in EDA projects. Such a step could reassure the UK defence industry that the UK is at least party to EU discussions on shared defence industrial procurement and production, including the new European Defence Industrial Strategy, which mentions mutually beneficial partnerships with third countries.73 If an arrangement with the EDA contained exclusions on joint exports and technology development, it could prove of limited use to the UK. But it would still be a step to rebuild trust.

The war in Ukraine has also demonstrated the importance of the capacity of the defence industries of Ukraine’s supporters; their stockpiles of equipment and munitions have run low as a result of supplying Ukraine. The UK could coordinate with Europeans on aspects of this. In the medium to long term, one ambition could be for the UK to participate in or work with the European Defence Fund (EDF), which supports defence research and development, but the option of joining the EDF is currently unavailable to third countries. And because participation could involve financial contributions by the UK, it would be politically sensitive in Whitehall. But it would have more impact than minimal agreements on mutual consultation around linking the UK’s defence industry to EU-wide projects. The need for coordination is pressing given that European military procurement remains fragmented and dependent on contracts from the US, preventing the efficiencies and stronger market signals that a joint approach could bring, and because the UK defence industrial sector will be significantly affected by any shifts in EU policy. With the future of the US security role in Europe increasingly in question, existing military support and equipment supplies for Ukraine (or potentially for other European countries in future) will come under strain unless their sources are diversified.74

Regular discussions on military and defence issues might also provide scope for the EU and UK to coordinate their approaches to improving their economic security – specifically, ‘de-risking’ or diversifying away from some higher-risk economic links with China. However, doing this coherently with all EU member states will be a challenge. Germany, France, the Netherlands and others have developed their own Indo-Pacific strategies, but greater coordination is needed.75 The EU’s recent Economic Security Strategy refers to the need for the EU to partner with others on managing shared geo-economic risks.76 The UK might also seek to revive discussions about working with the EU on development and humanitarian partnerships with developing countries – especially to maximize the impact of offers to the Global South on climate and development cooperation.

Even outside formal defence arrangements, the UK might use its hosting of the European Political Community (EPC) – an intergovernmental summit not exclusive to the EU – in July 2024 to play a more active role in shared approaches to security, defence and geopolitical risks. As a new format, the EPC does not at the moment offer a realistic route to important pacts, but it provides the UK with a way to consult EU and non-EU allies on geopolitical issues and security.77 Ukraine has shown the importance of this.

Polls have indicated growing dissatisfaction with Brexit. This does not mean people would favour rejoining the EU if full membership were now on the table, but the trend suggests a closer relationship in some areas is acceptable if the benefits are clear.

Any cooperation with the EU depends, of course, on UK public support. Polls have indicated growing dissatisfaction with Brexit.78 This does not mean people would favour rejoining the EU if full membership, including of the euro, were now on the table; Leave voters still value the idea that the UK can control its own affairs.79 But the trend suggests a closer relationship in some areas is acceptable if the benefits are clear. Some polls find net support for aligning with the EU on product standards, food safety and workers’ rights;80 one survey found 78 per cent of voters in favour of a closer future relationship with the EU in some form, though their views on how to achieve this differ.81

The chance that the US will reduce its support for European defence may encourage a more mutually beneficial relationship between the UK and an expanded EU: one that does not box the UK into a political and monetary union, but that reduces trade barriers and enables cooperation on climate, energy and economic security, on upholding the rule of law and principles of human rights, and on pursuing reform of international institutions.

The UK’s present and future role in supporting Ukraine

A reset in the relationship with the EU might enable the UK to push even more strongly for support for Ukraine among European allies. Since Russia’s full-scale invasion in 2022, the UK has played a prominent role in the Western response – training Ukrainian forces, providing direct military aid and humanitarian support,82 and helping to coordinate European diplomatic and defence support. In January 2024, the UK signed a security cooperation agreement with Ukraine, becoming the first country to meet a July 2023 commitment by all G7 countries to reach such agreements.83

A notable public and political consensus has remained in place in the UK on support for Ukraine – one that is not as strongly present in other European countries.

The UK can reasonably claim that its support for Ukraine has galvanized other governments: it sent anti-tank missiles to Ukraine before the full-scale invasion, establishing a precedent for other countries to donate weapons of their own, and set the pace by sending tanks and longer-range missiles sooner than other allies.84 A notable public and political consensus has remained in place in the UK on support for Ukraine – one that is not as strongly present in other European countries.85 The £3 billion announced to date in 2024 has taken the cumulative value of UK support for Ukraine to over £12 billion.86 Although accounting varies, as of February 2024 the UK seems to have been the third largest donor in terms of allocated military aid (as opposed to other types of aid, including financial and humanitarian) behind Germany and the US.87

Although such spending has imposed a financial burden, the UK’s role in supporting Ukraine has clarified British foreign policy. It has enabled the UK to take a lead in coordinating international military assistance among donors, such as through the International Donor Coordination Centre in Stuttgart,88 and boosting UK–Europe strategic defence cooperation.89 The war has also focused attention on avoiding dependency on hostile states and has highlighted the risks they pose, whether in traditional defence terms or through illicit finance and threats to energy security.

All that said, the UK’s leadership on Ukraine should not be exaggerated. More than anything, the role of the US has been crucial. As of 29 February 2024, Europe’s allocations of combined military, financial and humanitarian aid to Ukraine (including those of EU institutions and the UK) totalled €89.7 billion, while US allocations totalled €67.1 billion. ‘Allocations’ include aid that has already been delivered or is earmarked for delivery, rather than just announced or promised. But within these figures, the US’s allocation of direct military aid stands at €43.1 billion, just over €1 billion more than Europe’s total.90 These figures do not include the package of US aid which passed Congress in April 2024, adding another €56 billion to total US military aid and further widening the gap with European contributions.91 In the period when this US aid was held up in Congress, European support was far from enough to replace US support, particularly for crucial needs such as ammunition supply.92

What next? The risk that a Russian victory – in any sense of the term – could embolden Vladimir Putin to go further in undermining European security makes the goal clear: the UK, given the position it has taken, should continue to supply arms and funding to Ukraine provided there remains a chance of Ukraine advancing in the war; and it should lobby the US and Europe to keep supplying arms and funding to Ukraine too. The announcement by Prime Minister Rishi Sunak in April 2024 that the UK will commit to the current level of support for as long as required is welcome, but this now needs to be reflected in realistic fiscal plans.93

Yet while all of Ukraine’s supporters have wanted it to win the war, there are different views about what winning means. At one end of the spectrum is President Volodymyr Zelenskyy’s insistence, at least in public, that Ukraine must regain every inch of territory seized by Russia, including Crimea. More pragmatically, victory at minimum probably means Ukraine retaining unimpeded sea access for its exports, and Russia being driven back far enough that it cannot regroup to strike again at Ukraine – or at Moldova or the Baltic countries.

The debate may prove to be academic. The outcome that presents the UK with the hardest decision also appears the most likely – a conflict that lasts several more years, and possibly longer. If US aid diminishes, in theory the UK could work with European countries to continue support in its place. And while any US withdrawal of aid could sow doubt among European governments about the worth of continuing to provide their own support, it might also strengthen the sense that Europe has to invest more in its own defence.

There are also warning signs of problems delivering on European promises – not least, disputes in Germany over the spending required, and obstruction from the Hungarian government of Viktor Orbán. And, despite progress, US and European defence industrial production is not consistently meeting the rate of Ukrainian consumption; the strategy of providing Ukraine with older or existing stockpiles is becoming ever less feasible.94 European spending, procurement and production capacity do not match Russia’s, and programmes to improve in these areas – such as the European Defence Agency’s multinational 155-mm artillery procurement initiative – have been too slow to match Ukrainian requirements, let alone what might be needed in the event of a crisis further halting or delaying US support.95 These issues strengthen the argument for greater UK coordination with European allies.

The UK could also support shared European efforts to bolster defence industrial production. Long-term plans for this, including the European Commission’s proposed European Defence Industry Programme, tend to be fraught with political division; post-Brexit, they are outside the UK’s immediate influence. But the UK could realistically support more urgent shared efforts to procure or produce the capabilities and equipment Ukraine needs – as has happened in a joint initiative with Latvia on leading an international coalition to supply drones.96 The UK could also build on the security relationships it has developed with the countries of the Joint Expeditionary Force (JEF), plus Eastern European allies and the new Polish government, to maintain momentum and pressure to contain Russia.

There is a further potential role for the UK beyond matters of military capability. With Ukraine one of the biggest bilateral recipients of British aid in recent years,97 the UK can contribute to rebuilding parts of the country and pooling funding for such work with other development partners. The next government should draw on the UK’s recognized development expertise to ensure support is delivered quickly, transparently and in line with international standards.

There is no inevitability to any outcome in the war. The Russian army could still run out of steam, although this does not seem to be on the horizon. It could, indeed, make further gains. Ukraine may eventually need to consider the prospect of negotiations, in which case the UK priority should be to support Ukraine’s position in them. Equally, hostilities could cease without a formal peace negotiation after several more years of intense fighting over a largely static front line in eastern and southern Ukraine. This might result in a deeply unsatisfactory de facto partition of Ukraine, with Russian troops refusing to withdraw and Ukraine’s military unable to evict them. The UK would then have a dilemma: whether to help Ukraine stabilize its front line, or keep re-equipping Ukraine for offensive military operations in the knowledge that this would likely produce diminishing returns. The UK government would also need to decide whether to encourage the admission of Ukraine to the EU, if that had not already happened; and whether to push for Ukraine’s accession to NATO. The latter might be diplomatically harder, though the UK would be in a strong position to influence the debate. However, the recent stalling by Hungary and Turkey of Sweden’s NATO accession bid has shown how unilateral objections can get in the way.

06 Conclusion

The UK’s strong institutions, diplomatic and international development expertise, and military and cultural assets all have the potential to support a more effective and sustainable foreign policy. They need to be used more coherently.

The UK has many strengths that support a foreign policy which advances its interests, values and standing in the world. A history that has brought close connections across the continents – and that underpins the UK’s web of modern alliances – is one. Nostalgia for a past when Britain was ‘Great’ is not.

The UK is a successful multi-racial democracy, comparatively harmonious, and liberal in its instincts for inclusion; high inward migration brings political strains, but this is a sign of the country’s profound attractions to millions of people. It has strengths in science and technology, higher education, global finance, defence and intelligence. It has cultural influence. The country has wide-ranging and effective diplomatic networks. Contrary to its reputation for cultural conservatism, the UK has demonstrated that it is capable of great change and improvisation (for instance, in the devolution of powers from Westminster or the introduction of same-sex marriage).

But it has lacked a clear plan for deploying these strengths. One casualty has been public trust in government, and yet that trust is essential for any kind of global role for the UK. The biggest shock to the UK’s international relations in recent years has been a withdrawal of public consent for the relationship between the UK and Europe. Brexit cost the country growth and prosperity, bewildered allies, and reduced the UK’s influence in trade negotiations.

But with a form of Brexit essentially agreed, British politicians should shed the embarrassing language of boosterism and acknowledge the realities of the UK’s position as a mid-sized power, if one with an outsized international role. The UK should build new alliances and not promise to old allies what it cannot deliver. In a world of suddenly more complex relations – with Russian troops in Ukraine, US power becoming unpredictable, and emerging powers taking on more leadership in the world, both on global issues and in the Middle East – the UK’s foreign policy must adapt to changing circumstances. At the same time, the UK’s new position outside the EU grants it the chance to do just that. It now needs to use that flexibility intelligently and constructively.

In trade policy, the UK should reach for the heights of pragmatism. Globalization is stuttering in many countries. Better to have quick, partial trade or investment deals than ones that take decades to negotiate or that demand compromises which may not get political backing. Advocating for the UK’s economic interests should be a priority for its politicians (who are too often hostile to the needs of financial markets, and uncomprehending of the speed of decisions needed in business).

Politicians should acknowledge that the UK needs to spend more on diplomacy, defence and foreign aid to achieve the goals set out in this research paper. If it chooses not to spend more in these areas, ministers will have to pick ruthlessly among the priorities.

In global governance, the UK should allow its principles and values to shape its goals, while recognizing that having a predictable and stable international system – including functional international institutions that can respond to global problems – is in its interests. The UK can reasonably aim to take a lead in governance and multilateral reform in a world in which many countries do not want an exclusively US- or China-led order. The UK has instincts and interests that are neither American nor wholly European – all the better to shape discussion of European security and the response to Russia, debt financing in low-income countries, and the complexity of shifting geopolitical relationships across Africa, Asia and the Middle East. If the UK moves quickly, it can also have a credible role in shaping the governance of new technologies, including AI. And it can and should continue to take a lead on climate change, as the energy transition will reshape global politics.

One of the next government’s hardest jobs may be at home. Any successful foreign policy rests on healthy institutions and prosperity. But Britain has been too casual about the need to protect its institutions and preserve its reputation for championing the rule of law.

One of the next government’s hardest jobs may be at home. Any successful foreign policy rests on healthy institutions and prosperity. But Britain has been too casual about the need to protect its institutions (including parliament and the courts) and preserve its reputation for championing the rule of law. Foreign and domestic policy are becoming ever more entwined, with the effects of global events evident at home in energy prices, immigration levels and a changing climate. Threats from hostile states and actors are ever more hybrid – security risks to the UK come in the form of cyberwarfare and economic coercion alongside traditional military threats. Yet foreign policy is often treated as a separate branch of state, locked away in the corridors and courtyards of the FCDO’s offices in King Charles Street, with the foreign secretary nominally one of the ‘top three’ posts in the cabinet but cut off from the horse-trading of the rest of Westminster.

The UK now needs to demonstrate to the world that it has a stable political system capable of delivering prosperity, and that government policies reflect the UK’s professed values. The ability of liberal democracies to pursue their ambitions and meet their promises to their citizens plays a central role in the global competition of values and political ideas. The UK starts with many advantages on its side. It now needs to show that it can function at home in order to secure the full potential of Britain’s role in the world.

Summary of recommendations

Navigating unpredictable great power dynamics

A second Biden presidency might enable the UK to pursue limited sector-specific deals in critical technology sectors, including access to subsidies under the Inflation Reduction Act. In a second Trump presidency, UK priorities should be preserving the AUKUS defence partnership with the US and Australia, and working with Congress to sustain support for Ukraine and cooperation on other shared interests.

The UK needs to increase its capabilities to manage its links to China. Currently, UK decision-making on China is dispersed between government departments, resulting in incoherent or competing agendas. One option would be to form a cross-government China-focused policy unit. Another would be to designate a clear lead department on China to manage the trade-offs between security and prosperity. An economic security strategy, with clear goals and targets, should give a better overview of UK vulnerabilities to supply-chain disruption or sanctions.

The Indo-Pacific remains important to UK security and trade, but the UK lacks the resources to fulfil its initial ambition in the 2021 Integrated Review of ‘establishing a greater and more persistent presence than any other European country’ in the region. The next UK government might continue to pursue a cooperative and limited version of an ‘Indo-Pacific tilt’. This could focus on enhancing links with regional partners – Australia, India, Japan, South Korea – and delivering UK commitments in defence partnerships, including AUKUS and GCAP. The UK might consider expanding access to the technology-sharing pillar of AUKUS to include regional allies such as Japan and South Korea, though this will need to be balanced with maintaining the partnership with the US and Australia; there is also possibly the option of expanding access to the other two Five Eyes members (Canada and New Zealand).

Improving the UK’s relations with Europe

The UK should pursue limited improvements to the trading relationship with the EU when the Trade and Cooperation Agreement (TCA) is up for review in 2026 – but policymakers should recognize that any changes will not massively improve the UK’s economic or strategic position.

The most fruitful immediate area for collaboration is likely to be in energy and climate policy – particularly linking the UK’s emissions trading scheme with that of the EU to avoid disparities between UK and EU carbon prices. Such disparities, if allowed to persist, will cause UK exporters to incur carbon taxes at the EU border and will also create other trade disruptions.

The UK should seek closer geopolitical, defence and security cooperation with Europe as the EU considers expanding and reforming. Steps might include:

Adopting regular security and defence consultation.

Pursuing an administrative arrangement with the European Defence Agency, similar to the relationships Norway, Switzerland and Ukraine already have. This could help to reassure the UK defence industry about long-term contracts and markets, and could rebuild links with the EU on defence industrial discussions. However, if the new arrangement contained exclusions for joint exports and technology development, it could prove of limited use to the UK. Nonetheless, it would still be a step to rebuilding trust and relations.

Working more closely with the European Defence Fund as a medium- to long-term ambition.This would carry a much higher price than just pursuing structured dialogues on defence and foreign policy, as it could involve financial contributions by the UK and would be sensitive politically. However, it would have more impact in linking the UK defence industry to EU-wide projects.

Regular discussions on defence and security with the EU might also lay the groundwork for coordination on economic security and ‘de-risking’ economic links with China, and potentially on humanitarian and development partnerships with countries in the Global South.

Strengthening a role in global governance and international development

The UK can use its experience in international development, its diplomatic networks and expertise, and its prominence in the multilateral system to address global problems while building alliances with mid-sized powers and a more assertive Global South. Priorities should include:

Focusing development spending on consistent and cost-effective areas of strength. This could include tackling extreme poverty through well-evidenced approaches such as cash transfers, and financing global health initiatives.

Focusing on reforming multilateral financial institutions and pushing them to provide more support to low-income countries. In particular, UK efforts in this area should include the continued use of loan guarantees.

Continuing to support low-income countries and some middle-income ones with the climate transition, including through Just Energy Transition Partnerships. This could also involve building partnerships with countries rich in critical minerals to share the benefits of resource wealth, including helping them to build production and processing capacity. That could help make green technology less dependent on supply chains dominated by China, and spread more widely the economic benefits of developing such technology. The UK would also be well positioned to influence standards on resource investment.

Working with others on more effective engagement with China and private creditors around debt restructuring and debt relief for poor countries.

On conflict, the next government should continue to seek a constructive role in the Middle East through the UK’s regional relationships. It should assist efforts to put forward credible plans for resolving the Israel–Palestine conflict, and should give more attention to preventing instability in flashpoints in its outer neighbourhood, such as in Sudan, Ethiopia and the Sahel.

Affording a global role

The next government needs to work out how it will afford these improvements in foreign policy:

In the current international security environment, any UK government should aim to spend more on defence and readiness. We would recommend a minimum target of 3 per cent of GDP spent on defence. The UK should have credible plans for meeting its NATO commitments, should improve recruitment and retention to reverse the shrinkage of the Army, and should streamline the many tasks the military is being asked to address.

On foreign aid, the government needs to re-establish the predictability and governance of its spending. It could base the ODA spending target on the previous year’s GNI, and hold a reserve for emergencies and shocks. It could ensure that the Home Office does not compete for the UK’s aid budget to spend on housing refugees and asylum seekers. A good start would be to situate accountability and oversight for all aid spending with the FCDO, and further strengthen the role of international development within the department.

The next government should invest more in domestic sources of global power, in upholding the UK’s reputation for impartial media, in science, technology and the UK’s defence-industrial base, and in critical technologies where the UK has an existing commercial and research advantage. It should address barriers to investment such as lack of laboratory space, problems with planning, regulatory uncertainty for businesses, and complex immigration rules that make it difficult for employers to attract talent.