International Affairs will Shape Starmer’s Early Agenda, with Implications for Business

There’s an old adage that foreign policy doesn’t win elections – and it was certainly not the ground upon which Labour fought the 2024 UK General Election. But arguably no British Prime Minister has taken office with a more diverse and challenging set of geopolitical issues to tackle than Sir Keir Starmer, many of which will shape his top priority of economic growth. Just days in, the new Prime Minister headed to Washington, D.C., for a pivotal NATO Summit, while new Foreign Secretary David Lammy embarked upon visits to Germany, Sweden and Poland as a first step to reshape relations with key European allies.

Against this backdrop, here are five international affairs issues – across diplomacy, trade, humanitarian challenges and more – that will shape the Government’s success and have a profound impact upon business, even if how is still unclear.

Navigating Russia’s war in Ukraine with NATO:

The NATO Summit gave Starmer an immediate opportunity to engage with North American and European leaders and set the UK’s tone on geopolitics. As the alliance marked 75 years and attendees talked gravely of the growing Russian threat, Starmer was quick to reinforce the UK’s commitment to NATO and support for Ukraine in the war against Russia. That included pledging ￡3 billion per year in funding for Ukraine for “as long as it takes”, approving Ukraine’s usage of UK-supplied missiles to strike Russian targets, and declaring Ukraine is on an “irreversible” path to NATO membership.

Starmer simultaneously instigated a review to increase the UK’s defence spending, while calling upon NATO allies to increase their own spending in response to growing global threats. And even as the alliance’s members consider the potential impact of a second Trump presidency upon U.S. engagement in NATO, the UK’s continued commitment to NATO and support for Ukraine gives other governments and British, American and European businesses greater hope for certainty and stability as they navigate the conflict.

Resetting EU relations:

Lammy’s quick departure to Berlin, Stockholm and Bydgoszcz, near the home of Polish counterpart Radoslaw Sikorski, was the first step in a significant effort to reset relations with European allies. Under a wide-ranging new UK-EU security pact, Lammy hopes to tackle issues across defence, cyber, trade, climate, the energy transition and more, during what he described as a “tough geopolitical moment”. But it comes as France moves through post-election uncertainty and EU institutions are formalising new leadership, which will fundamentally affect immigration and refugee policies, important for both the UK and EU.

While initial visits focused on EU Member States, Lammy and his FCDO colleagues will make the same effort to rebuild bridges with Brussels after the tensions under successive Conservative Governments. Labour was clear through the campaign that rejoining the EU or joining the single market or customs union is not on the agenda. For companies grappling with post-Brexit trade barriers, the ambition of improving UK-EU relations has potential to create much welcomed solutions to market access and trade friction that has affected business growth. But it comes as some EU Member States themselves consider more nationalist economic policies that could limit UK businesses’ opportunities.

Managing U.S. uncertainty:

The next six months in the United States will be dominated by the twists and turns of the Presidential election. While predicting the result – or the events of even a week ahead – may be impossible, Starmer was quick to emphasise that the “special relationship” is as strong as ever and to position the UK as a bridge between the United States and Europe, a sentiment echoed by President Biden, who described the UK as the “transatlantic knot”.

Regardless of the warm feelings in Washington this week, Starmer, Lammy and others will need to manage through a turbulent period in the United States. While Conservatives’ dream of a UK-U.S. free trade agreement is long over, there may be questions about the durability of any commitments from the Biden White House. Equally, they and Chancellor Rachel Reeves will be eager to show American corporate leaders that the UK is open for business and now offers a level of stability that is hard to find in competing markets. Particularly with a sense that UK assets are available at affordable prices, that could make the UK an attractive investment destination for American firms.

Finding a pathway in the Middle East:

The war between Hamas and Israel and resulting humanitarian crisis in Gaza became an unexpected political difficulty for Labour in the election, with several independent candidates securing shock wins over Labour candidates based primarily on their Gaza position. Labour’s manifesto included recognition of Palestine as a state, a point reiterated by Starmer this week in a call to Palestinian President Mahmoud Abbas while also calling for a ceasefire and release of Israeli hostages. Resolving the crisis and finding a pathway to peace will be a top priority, but solutions will remain hard to find.

Meanwhile, the UK is expected continue to partner with the United States to target Houthi rebels in Yemen that attack commercial ships in the Red Sea, while maintaining a hard position against Iran. But it will simultaneously look to maintain close relations with key GCC allies, both on defence and security needs and economic opportunities. While dynamics in the region will remain volatile, businesses can expect to see continued efforts to drive inbound and outbound trade and investment with GCC countries – and as the UK works through U.S. and EU relations, may even find the GCC presents more opportunities.

Determining the approach on China:

Over 14 years of Conservative Government, the UK’s relationship with China “oscillated wildly”, declared Lammy in April, who committed to a full audit of the UK’s approach to what some consider the country’s fiercest economic and geopolitical rival. The goal will be to understand where to complete, cooperate and challenge China, while managing the United States’ tough position against China and the EU’s more technocratic approach.

Starmer will feel these pressure points early on, as the UK decides whether to align with the EU and United States on investigating Chinese state subsidies for electric vehicles, which resulted in the EU slapped substantially higher tariffs on Chinese EV imports. It will set the stage for the wider UK-China relationship, with potentially significant consequences for UK companies operating in China if Starmer’s Government takes a strong line against China that escalates tensions, leading some business decision makers to call for cooler heads.

Beyond these top-five issues, more to come:

These five priority areas just scratch the surface of international risks, complexities and opportunities facing Starmer’s Government. Further questions include how to advance the UK’s trade and investment interests, what role the UK will play on climate action, how to shape relations with a range of Asia-Pacific powers including India, Japan and Korea, and what the UK’s strategic engagement in Latin America and Africa will look like. Over the coming weeks, FleishmanHillard’s International Affairs team will examine these issues and more.

Based on week one, the new Government is setting a course to position the UK as a beacon of stability, a protector of security, and an advocate of economic opportunity. Achieving that ambition in a volatile world may be Starmer’s great challenge.

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Contact the FleishmanHillard International Affairs team at [email protected] to discuss the implications for your organisation.