The UK and EU are negotiating a new sanitary and phytosanitary (SPS) agreement to reduce post‑Brexit barriers on food, animals and plants. Broadly, SPS rules cover health and safety standards for agricultural trade. Under a May 2025 "Common Understanding", both sides envisaged a near-common SPS area, where most movements of animals, plants and foodstuffs would occur without the certificates or controls currently required. In practice, this means the UK would commit to dynamic alignment with EU SPS rules, updating UK law in step with the EU and contributing financially to EU agencies, so that inspections and paperwork at the border are largely eliminated. Industry analysts suggest that such an SPS pact could boost UK food and drink exports by roughly 22% by restoring easier EU market access, highlighting how much trade has been stifled by the new checks. For example, UK agri-food exports to the EU fell by over 25% by volume between 2017 and 2024, as Brexit-related customs and SPS checks were introduced. By contrast, exports to non-EU markets have remained more stable.
In this context, Brussels is insisting on a "termination clause" in any new SPS deal, which is informally dubbed the "Farage clause" after Nigel Farage, whose Reform UK party has pledged to dismantle regulatory alignment with the EU, raising concerns in Brussels about the long-term durability of any future agreement. The clause would require a party that withdraws from the SPS agreement to cover the other side's costs of reimposing border controls, including infrastructure, staffing, and equipment for customs, veterinary and plant health inspections.
Negotiators on both sides acknowledge that exit clauses and compensation mechanisms are standard in trade agreements. UK ministers have protested that any termination clause would be mutual, so the EU would owe the UK the same costs if Brussels withdrew. Nonetheless, the scale of SPS controls means the sums involved could be enormous. When Britain left the EU in 2020, the EU set up a €5.4 billion Brexit Adjustment Reserve to help member states cope with reintroduced border checks on UK goods. Ireland alone received about €920m, the Netherlands €800m, and France €672m, to fund hundreds of new customs, veterinary and port police staff. The Farage clause would in effect force a future UK government to reimburse those kinds of costs if it ditched the SPS deal.
In this sense, the clause is not merely a legal safeguard but a mechanism with significant economic implications for both sides. For the EU, it shifts financial risk away from public budgets, protecting taxpayers from the costs of future disruption. By raising the financial price of political reversals in the UK, the clause aims to provide long-term certainty for EU farmers, exporters and national authorities. Above all, it reflects Brussels' determination to avoid a repeat of the costly post-2020 adjustments.
The scale of those potential costs should not be underestimated. Re-establishing SPS controls would be highly expensive. As the Guardian notes, the clause would have the leaving party pay to reinstate customs booths, scanner equipment, lorry-parking facilities, mobile vet labs and other infrastructure. For example, France spent at least €200m on checkpoints for Calais‐Dover traffic, and the Netherlands deployed 900 customs officers plus 145 vets in Rotterdam after Brexit. Under the Farage clause, the UK would cover such costs if it exited, potentially amounting to billions of pounds. The Farage clause thus insulates EU national budgets against unexpected spending that would otherwise fall on taxpayers.
Yet the economic implications of the SPS reset extend beyond the costs of withdrawal. The agreement would also require the UK to make ongoing financial contributions in exchange for regulatory alignment.
The draft SPS deal anticipates that the UK will pay to "join" EU systems. Reports suggest a formula in which the UK pays its proportional share of agency budgets, plus an extra 4% "participation fee". In addition, the May 2025 Common Understanding explicitly calls for "an appropriate financial contribution" from the UK towards the EU's SPS costs. These payments are effectively the price of market access, which is roughly analogous to Norway's arrangements with the Single Market. Economically, they reflect the principle that UK businesses would benefit from cheaper access, so UK taxpayers should help underwrite EU enforcement. In effect, this establishes a trade-off: the UK accepts regulatory alignment and financial contributions in return for smoother market access.
From a trade perspective, the economic case for an SPS agreement is compelling. The biggest economic benefit of an SPS deal would be reduced trade friction. By dynamically aligning regulations, UK exporters avoid duplicative testing and paperwork. Trade bodies estimate that a full SPS agreement could boost UK agri-food exports by around 20-25%. For EU producers, the benefit is reciprocal, bringing relief to EU farmers and fishers trying to export to Britain. Under an SPS deal, UK farmers and food companies would gain access to a larger market, potentially raising output and jobs. For both sides, fewer barriers would translate into faster supply chains, lower administrative costs and improved market access.
However, the economic gains of alignment are closely tied to the agreement's durability. If SPS controls went back in place, consumers could see higher prices due to new bottlenecks and compliance costs. EU livestock and crop producers might face new competition if the UK diverged and struck non-EU trade deals. The Farage clause is designed precisely to prevent this scenario by making regulatory reversal financially unattractive.
Overall, the economic calculus for the EU is clear: invest now in regulatory alignment, or risk paying far more later through lost trade, higher consumer prices and the costly reconstruction of border controls. By embedding compensation mechanisms in the SPS agreement, Brussels is seeking to quantify and price political uncertainty itself. As one EU commentator observed, the bloc knows "we need these agreements more than they do" and will therefore "extract every last concession" from the UK. This underlines the EU's leverage and its long-term focus on fiscal and regulatory stability. As negotiations continue, both sides must weigh the benefits of frictionless agri-food trade against the economic risks of future policy reversals.
Written by
Dr Lina Klesper is an International Legal Assistant at PKF Malta