How Iran conflict has pushed UK to fix 'deep damages' caused by Brexit

Brexit was designed for control in a 'stable' world, but in a volatile one shaped by the Iran conflict, it is forcing the UK back towards the EU

A decade ago, the United Kingdom voted to leave the European Union, with 52 per cent backing the move to reclaim national sovereignty, curb free movement, and chart independent trade policies. The process, formalised in December 2020, was pitched as a decisive break towards a more self-reliant “Global Britain”.

 

That framework is now facing a stress test. On Wednesday, UK Prime Minister Keir Starmer said Britain’s “long-term national interest requires closer partnership with our allies in Europe”.

 

The timing is telling. A rapidly escalating conflict involving Iran in West Asia has exposed vulnerabilities in the global economy, which has compelled the UK to reassess how far it can operate outside deep regional partnerships.

 

Why was Brexit built around independence and control?

At its core, Brexit was built on a simple proposition: sovereignty would translate into strength.

 

The campaign to leave the EU revolved around the idea of “taking back control” of laws, borders, and trade policy. By exiting the bloc, Britain sought to reduce its dependence on European institutions and reposition itself as a globally agile economy, free to strike its own deals.

 

Implicit in that vision was a broader assumption that the world would remain relatively stable, governed by predictable rules and open trade flows.

 

That assumption is now under strain.

How did Brexit weaken the UK’s economic buffers?

Even before the Iran conflict, cracks had begun to show.

 

The UK’s departure from the EU introduced new frictions in trade, particularly with its largest economic partner. Businesses faced regulatory hurdles, supply chains became less seamless, and investment sentiment remained subdued compared to pre-Brexit expectations.

 

Data shows that Britain entered 2026 with minimal economic momentum, with GDP expanding by just 0.1 per cent in the final quarter of 2025.

 

At the same time, business investment remained weak, while much of the limited growth was driven by public spending rather than private sector expansion.

 

The UK’s departure from the European Union also introduced persistent frictions in trade with its largest partner. Leaving the single market and customs union meant the reintroduction of non-tariff barriers and regulatory checks, which made supply chains less seamless and increased costs for businesses.

 

Longer-term estimates suggest that Brexit has had a measurable impact on economic output. Research indicates the UK economy is around 2–2.5 per cent smaller than it would have been otherwise, with weaker productivity and reduced trade intensity with the EU.

 

Economic growth, too, struggled to gain momentum. Without the cushion of frictionless access to European markets, the UK found itself more exposed to external shocks.

 

There are also signs of structural shifts in trade patterns. The share of UK imports from the EU has declined significantly over time, reflecting a gradual reorientation of trade flows but also the loss of frictionless access to its closest market.

 

Taken together, these trends point to a broader shift: rather than insulating the UK economy, Brexit altered how it absorbs shocks, which left it more exposed when global disruptions occur.

How has the Iran conflict exposed these vulnerabilities?

The ongoing conflict involving Iran has not created these structural weaknesses, but it has amplified them.

 

Energy vulnerability: 

 

While the UK is not heavily dependent on direct Middle Eastern energy imports, it remains exposed to global price movements. A major share of the world’s oil and liquefied natural gas flows through the Strait of Hormuz.

 

Recent assessments have flagged that any disruption in the region could push up global energy prices sharply. Central bank commentary has already warned that the Iran conflict has heightened risks to financial stability through rising energy costs, underlining how even indirect exposure feeds into domestic inflation pressures.

 

Economic shock: 

 

The economic fallout is already visible.

 

Consumer confidence in the UK has “collapsed” amid rising energy prices and inflation concerns, according to industry data cited by Reuters in a report earlier this week. At the same time, retail activity has begun to weaken, with sales falling by 0.4 per cent in February 2026, even before the full impact of the conflict was felt.

 

Higher energy costs are feeding directly into household finances, raising mortgage pressures and squeezing disposable income. For an economy that was already growing at just 0.1 per cent in late 2025, the shock has proved particularly sharp.

 

Trade disruption: 

 

The conflict has also raised concerns over global trade flows.

 

The Strait of Hormuz handles a substantial portion of global oil shipments, and any disruption has ripple effects across shipping routes, freight costs, and insurance premiums. This has added uncertainty to already strained supply chains.

 

For the UK, which has faced increased trade frictions since leaving the EU’s single market, such disruptions carry an added cost. Businesses are dealing not only with global volatility but also with post-Brexit regulatory hurdles, making trade flows more complex and less resilient.

 

Taken together, the Iran conflict has underscored a broader reality: global shocks tend to magnify pre-existing weaknesses.

 

For the UK, Brexit did not create these vulnerabilities, but it has limited the country’s ability to respond collectively to them, particularly when compared to the coordinated mechanisms available within the European Union.

Why is US uncertainty adding to the pressure?

At the same time, the UK’s traditional reliance on the United States as its primary strategic partner has become less certain.

 

Tensions within Nato, coupled with the unpredictable foreign policy stance of US President Donald Trump, have raised questions about the reliability of transatlantic alignment. Diverging approaches to the Iran conflict have further highlighted these differences.

 

Trump, on repeated occasions, has slammed Nato for not joining the United States' military operations in Iran. He has openly called out Nato and even said, “Nato is nothing without the US.”

 

Meanwhile, Starmer has made it clear that the UK will not enter the war due to pressure from Trump.

Why is the UK moving closer to Europe again?

In this context, Europe is emerging once again as the UK’s most stable and immediate partner.

 

Closer cooperation offers tangible advantages, whether in managing energy security, aligning trade responses, or coordinating defence strategies. The logic is less ideological and more practical: proximity and shared interests matter more in times of crisis. As Starmer said, “The (UK) government is focused on deepening its relationship with Europe, and it is necessary to undo some of the ‘deep damage’ done by Brexit.”

What does this mean for Brexit going forward?

Calling for an “ambitious” reset in relations, Starmer, earlier this week, ruled out rejoining the EU’s customs union or its single market.

 

This does not signal a reversal of Brexit. But it does suggest that operating entirely at arm’s length from the EU is becoming increasingly difficult in a volatile global environment.

 

Starmer’s position showcases this balancing act.

 

He has ruled out rejoining the EU, as well as returning to the single market or customs union. At the same time, his push for closer cooperation across trade, defence, and energy points to a more pragmatic approach.

 

Rather than undoing Brexit, the strategy appears aimed at making it function more effectively under current conditions.

 

This recalibration, however, comes with political constraints. Brexit remains a sensitive issue domestically, limiting how openly its shortcomings can be acknowledged. As a result, Starmer is leaving no stone unturned to portray this shift as “damage control” necessitated by Brexit.