BRUSSELS, BELGIUM – The European Union has formally stated that the United Kingdom will be required to pay into the EU budget to gain access to aspects of the European single market, a significant development in the ongoing post-Brexit negotiations. The confirmation, which came on Tuesday, 18 November 2025, centres on the UK's potential participation in the EU's internal electricity market and has been described as a major test for the renewed UK-EU relationship.

Ireland’s Europe Minister, Thomas Byrne, articulated the EU's position, stating it is "politically realistic" for the UK to make a financial contribution for closer ties. "Ultimately there is a cost to a lot of that and there are discussions to be had in terms of the cost to Britain, and certainly some other member states would see that as a priority issue," Byrne said on Tuesday. This stance is supported by a majority of EU member states, including Germany and Belgium, who have cautioned against allowing the UK to "cherrypick" benefits of the single market without adhering to its rules and financial obligations.

The demand for payment is not limited to the energy sector. The two sides are also at a standstill over the EU's proposed entry fee of up to €6 billion for British companies to participate in a €150 billion EU defence programme. EU officials argue that such contributions are standard for non-member countries like Norway and Switzerland that participate in the single market.

Implications for UK-EU Relations

This development follows a landmark summit in May 2025, where UK Prime Minister Keir Starmer and European Commission President Ursula von der Leyen agreed to explore the parameters for the UK's possible participation in the EU's internal electricity market. Rejoining the market would help mitigate post-Brexit inefficiencies in energy trading that have increased costs. However, the subsequent demand for budget contributions has introduced a significant hurdle. Commission officials have described the UK as a "complicated and challenging counterpart," anticipating that financial considerations will be a central challenge in the upcoming negotiations.

In a more positive development for the UK government, Minister Byrne expressed hope for a deal on a veterinary agreement to ease food and animal checks at the border, potentially during Ireland's EU Council presidency in the second half of 2026. The European Commission received a mandate to negotiate this agreement last week, which Byrne suggested could be a "gamechanger" for trade.

Context for Kenya and East Africa

While the direct impact on Kenya is not immediate, the evolving UK-EU relationship forms a critical backdrop to the region's trade dynamics. Following the UK's departure from the EU on 31 January 2020, Kenya moved to secure its trade interests. On 8 December 2020, Kenya and the UK signed an Economic Partnership Agreement (EPA) to ensure Kenyan goods would continue to have duty-free and quota-free access to the UK market. This agreement, which took effect on 1 January 2021, was largely based on the text of the EAC-EU EPA.

The Kenya-UK EPA has proven beneficial, with Kenyan exports to the UK surging by 64% to $1.43 billion in the four years to 2024, according to data from the UK's Department for Business and Trade. Key exports include tea, coffee, flowers, and vegetables. The total volume of trade between the two nations grew by over 50% to $2.51 billion in 2024 from $1.66 billion in 2021.

Separately, Kenya signed an EPA with the European Union in December 2023, which entered into force in July 2024. This was pursued bilaterally after negotiations for a bloc-wide EAC-EU agreement stalled, a move permitted by the EAC under the principle of 'variable geometry'. The EU remains a vital market, being the EAC's second-largest export destination.

The UK's negotiations for access to the EU single market, and the associated costs, could have ripple effects. Any new trade arrangements or economic friction between the UK and the EU could influence supply chains, investment flows, and the overall economic climate in which Kenya operates. A closer, more integrated UK-EU economic relationship could create a more stable and predictable environment for Kenyan exporters who deal with both markets. Conversely, prolonged disputes could introduce uncertainty. Kenyan policymakers and businesses will be closely monitoring these negotiations as they unfold.