Rachel Reeves has been accused of a "Brexit betrayal" after declaring that Britain's future is "inextricably bound with that of Europe".
Last night, the Chancellor claimed closer relations with Brussels were the "biggest prize" for the UK economy - and revealed Labour was ready give away powers to the EU in order to secure a better deal.
"I think further integration will require further alignment - but I'm up for that. Keir Starmer's Government is up for that," she said.
"I strongly believe that Britain’s future is inextricably bound with that of Europe, and that is for economic reasons... but also reasons of security, resilience and defence.
"The truth is, economic gravity is reality, and almost half of our trade is with the European Union. We trade almost as much with the EU as the whole of the rest of the world combined."
Her remarks represent a marked reversal - just three weeks ago, she told Davos delegates that Britain could not "go back in time" in its relationship with the EU.
And they have raised fears that she and the PM may be veering to the left to cool an emboldened Cabinet after a week of leadership challenges and scandal.
Reform UK's Suella Braverman said: "The great Brexit betrayal is underway. Fresh from kowtowing to communist China, the Government are exploiting their own chaos in No10 to quietly pull us back into the European Union... We will once again become a rule taker, not a rule maker."
FOLLOW BELOW FOR LIVE UPDATES THROUGHOUT THE DAY...
Jim Ratcliffe's illegal migration warning was 'wholly inappropriate', says Liberal Democrats deputy leader
Daisy Cooper slammed the remarks made by the Manchester United co-owner
|GB NEWS
Manchester United owner Sir Jim Ratcliffe should apologise for his “wholly inappropriate” remarks about immigrants, according to Daisy Cooper.
The Deputy Leader of the Liberal Democrats spoke on GB News about Sir Jim's warning that the UK has been “colonised by immigrants”.
His comments have sparked an almighty row even reaching 10 Downing Street, with Sir Keir Starmer among those demanding an apology.
Asked by Anne Diamond whether she agrees with the Prime Minister, Ms Cooper said: “Yes, whether people have concerns about immigration or not, we can debate those.
“That kind of language, I think, is wholly inappropriate, I think he should apologise.”
BREAKING: UK GDP rate only grew 0.1% in last three months of 2025 - despite Rachel Reeves's attempts to bolster economy
The UK economy grew by just 0.1 per cent between October and December last year, the Office for National Statistics has revealed.
Mel Stride hits back at Rachel Reeves with fierce-take down of Labour's Brexit plans
Sir Mel Stride has hit back at Rachel Reeves's remarks last night, urging Labour to accept that their "poor choices" have led to economic hardship - not Brexit.
"It’s no secret that Reeves and Starmer have wanted to row back on Brexit since day one," Sir Mel said.
"Labour are desperate to blame anyone but themselves for their economic failures.
"Under increasing pressure from their own soft-left colleagues following the Mandelson scandal, Starmer and Reeves would rather point the finger at Brexit than accept their poor choices have been a disaster for our economy."
It's not just the Chancellor... Sadiq Khan reveals his 'ultimate goal' is to reverse Brexit as he declares: 'We need Europe!'
Sir Sadiq Khan has said his "ultimate goal" is to reverse Brexit.
The Mayor of London revealed he eventually wants Britain to rejoin the EU, and believes it will happen within his lifetime.
In the meantime, he called for Britain to rejoin the single market and customs union - flying directly in the face of his party.
Earlier this week, Downing Street ruled out rejoining the customs union after Valdis Dombrovskis, the European commissioner for economy and productivity, said the EU would be open to the idea.
SIr Sadiq said told The Observer: "Brexit was the biggest act of economic self-harm any country’s ever done."
"My ultimate goal is for us to rejoin and I think it will happen in my lifetime. I definitely want us to be part of a customs union.
"I’m somebody who’s an advocate for us being part of a single market. I think we can negotiate more now, because of how geopolitics has changed, than we could in 2016 or 2019.
"Europe needs us and we need Europe.”
RECAP: What did Rachel Reeves say at the WEF - just three weeks ago?
PICTURED: Chancellor Rachel Reeves speaks alongside US Commerce Secretary Howard Lutnick in Davos
| GETTYAt the World Economic Forum's annual gathering in Davos last month, the Chancellor vowed Britain "could not go back in time" on Brexit.
"Since we’ve left the EU, we have done trade deals with India, with the US, with South Korea," she said.
"I don’t think you have to return to the customs union to seize greater benefits of free and fair trade."
That was seen as a slap-down to calls from around the Cabinet table to cosy back up to Brussels.
Business Secretary Peter Kyle had claimed it would be "crazy" for Britain not to consider the idea of joining a customs union.
Deputy PM David Lammy said it was "self-evident" that the British economy had been hurt by Brexit, adding that Turkey's economy had grown since it forged greater ties with Brussels by joining a customs union.
And Health Secretary Wes Streeting said that being part of the customs union had yielded “enormous economic benefits" before Brexit.
RECAP: No10 insider goes public to reveal details of exactly what Keir Starmer knew about close aide's paedophile links
Sir Keir Starmer backed nominating his former communications chief for a peerage despite being told of his links to a paedophile councillor, an ex-No10 adviser has claimed.
Tim Allan, who resigned from No10 on Monday, confirmed the Prime Minister's ex-chief of staff Morgan McSweeney instructed him to discuss Matthew Doyle's friendship with Sean Morton.
The Prime Minister was first made aware of concerns about Lord Doyle's relationship with Morton on December 4...
More From GB News