‘Europe is crying out for closer relations with Britain’

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Sir Ed Davey, the Liberal Democrat leader, has claimed his party is better placed to derail Nigel Farage’s bandwagon at the next election, insisting the public and the City of London want to see a return to moderate politics and a dismantling of Brexit.

Davie begins 2026 with a renewed call for Britain to form a customs union with the European Union, claiming that this will accelerate growth and restore confidence in bond markets. “It will potentially save several billion in debt costs.”

Speaking to the Financial Times, Davie said the Lib Dems could counter the global trend towards political extremism with a centrist message that embraced Europe and “traditional British values ​​of tolerance, respect for the rule of law and decency”.

The Liberal Democrats came in fifth place in a recent Politico poll, with 13 per cent, behind the UK Reform Party, Labour, Conservatives and Greens. But Davey said the political landscape is opening up for his party.

He argues that the Lib Dems are capable of fighting Reform in his party’s southern heartlands and taking on Farage’s party in areas such as the Midlands and the north, where Labor is in decline.

“We are ready to grow as a party in a way that we have not seen in 100 years,” he said. He added, “We will seek to obtain a record number of seats. We will be a big surprise and a formidable player in the next parliament.”

Cheerful optimism is part of Davie’s political style, as evidenced by his campaign stunts and photo opportunities, but he insisted that assessment was rooted in reality, despite the Lib Dems’ poor polling.

He pointed out that the party won more council by-elections last year than the Conservatives, Labor and Greens combined, and he expected this to continue in May elections for the Scottish Parliament, the Welsh Assembly and the English councils.

“We have had a record seven years of consecutive wins in local elections — and we will maintain that record,” he said. “But I want to see how we can do in areas where Labor is just disappearing and where we are the only ones who can beat reform.”

Davey’s reasoning is that the Liberal Democrats are able to strengthen their position in the south, where the party won most of its record 72 seats at the last election, while building a presence in the former Labor region of the Midlands and the north.

He said the Lib Dems’ prospects would help the Conservatives, under the leadership of Kemi Badenoch, drift towards reform on issues such as immigration, Europe and sympathy for Donald Trump.

He claimed the Conservatives would “make a deal with reform” in a hung parliament – ​​Badenoch has ruled out any deal – which he said would repel many traditional Conservative voters.

He described the prospect as “a hard-right alliance that rejects close ties with Europe, embraces Trump’s America, and destroys the British values ​​that business has come to love.”

Davie is determined to continue campaigning for Britain to return to a customs union with the European Union, arguing that Prime Minister Sir Keir Starmer will be doomed unless he takes bold steps to boost economic growth.

He said the city agreed. “I’ve lost count of the number of business people in town who talk to us in a way they’ve never done before.” He added that the gold markets would welcome the return to the customs union as a path towards sustainable growth.

Davie acknowledged that could mean Britain would have to negotiate with Brussels over the future status of trade deals concluded since Brexit – including agreements with Trump and India – but said the benefits of customs union membership would outweigh any potential downsides.

He said: “Europe demands closer relations with Britain.” But he claimed that Labour’s lack of ambition in areas such as creating a youth mobility plan had convinced many European capitals that the UK was not serious about changing the relationship.

Although the Lib Dems finished 2025 in fifth place in the polls, Davie insisted he had “never been more ambitious” for his party. “Compare us with every other party in the House of Commons today, and we are easily the most united, with the biggest smiles on our faces.”

Davey says that in a divided political landscape – with five or more parties competing for votes – the Lib Dems can break through from the center and win parliamentary seats with less than 30 per cent of the vote locally.

“I think there are a number of seats that Labor will have no chance of winning, and people will either get a Reform MP or a Lib Dem MP.”