Almost a decade on from the Brexit vote, the verdict is clear. Britain’s immediate doomsday economic scenario might not have come to pass. But after years of political paralysis – and with the eventual introduction of tougher trade barriers in 2020 – trade, investment and growth in living standards have all suffered.

Just as it was on the morning after the 2016 referendum, the big fight is about what the government should do in response.

At the weekend, Wes Streeting became the latest frontbench Labour politician to call for a deeper trading relationship with the EU. His remarks were interpreted as a suggestion that Britain could join a customs union with the EU – something that Keir Starmer has ruled out.

As the UK’s single largest trading partner, the idea has its advocates. UK exports of goods and services to the EU were worth £358bn (41% of the global total) last year. Imports were worth £454bn (51% of the UK total).

Under the trade and cooperation agreement negotiated by Boris Johnson’s government, Britain has tariff-free trade with the EU. However, access is limited by other rules and restrictions – and falls significantly short of the UK’s previous membership of the EU single market and customs union.

Goods exports in particular have been negatively impacted. Volumes collapsed immediately after the end of the Brexit transition period in January 2021, and remain short of 2019 levels in real terms.

While this coincided with the Covid pandemic – making it harder to untangle the Brexit impact – economists have shown the UK clearly suffered a weaker period for its trade in goods than for other G7 countries, and that activity would have been considerably stronger under a remain scenario.

Services exports to both the EU and non-EU countries also fell in 2020, but have recovered more strongly since. However, for some sectors, loss of access to the single market has had a big impact: particularly in the City of London, where financial services exports have lost significant market share in the EU.

Labour’s manifesto was clear it wanted “no return” to either the single market or customs union. The main stumbling block would be accepting freedom of movement – perceived as a significant driving force behind the leave vote.

Instead, the party promised to “work to improve the UK’s trade and investment relationship with the EU, by tearing down unnecessary barriers to trade” – including a veterinary agreement to ease food trade, a deal to help touring artists, and an agreement on the mutual recognition of professional qualifications.

In the UK-EU “reset” earlier this year, both sides took a major step towards negotiating these deals. Plans for a youth mobility scheme, as well as cooperation on energy, defence and security were also mooted.

However, the economic boost would probably be limited. Any deals will take a considerable amount of time, and potential compromise, to negotiate. The government’s own assessment suggests a veterinary deal and cooperation on energy would boost UK GDP by only about 0.3% by 2040. That is much smaller than the economic cost of Brexit, estimated at 4% of GDP by the Office for Budget Responsibility.

A customs union would probably have a bigger benefit.

Under such an arrangement, the UK would escape some of the bureaucracy introduced by Brexit – including complex “rules of origin” requirements for exporters to access tariff-free trade, which estimates show add 2-8% to firms’ costs.

The Liberal Democrats claim that a “bespoke” UK-EU customs union could deliver a 2.2% boost to the economy, and bring in £25bn a year for the exchequer.

The figure is sourced from research by the consultancy Frontier Economics commissioned by Best for Britain, which campaigns for closer EU ties. However, the UK in a Changing Europe thinktank warns the findings are modelled on “deep UK-EU regulatory alignment in goods and services” – something that would extend beyond the arrangements of any customs union.

Agreeing a customs union deal would be far from straightforward. Rather than “rejoining”, the UK would need to negotiate a fresh agreement – similar to deals done by Brussels with Turkey, Andorra and San Marino.

That would open the door to lengthy negotiations about what exactly a UK-EU customs union would look like. Experts say the EU would drive a hard bargain, and that conditions for varying levels of access would be applied – with freedom of movement and budget contributions among potential demands.

Under a customs union, Britain would apply the same tariffs on imports as the EU. However, this could mean outsourcing trade policy to Brussels without the UK having formal input into the decision making.

This would mean the UK would be unable to offer more favourable deals to other countries – putting at risk post-Brexit agreements. For some advocates, an independent trade policy helped Britain avoid the worst of Donald Trump’s trade war, and has opened up new opportunities. For others, such a loss would be no big deal – given agreements reached by the government so far have been shown to add little to the economy.

Most economists agree that closer relations with the EU could boost growth. However, the trade-offs involved will entail years of political wrangling – both on the domestic front, and in negotiations with Brussels.