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

Davey is starting 2026 with a renewed call for Britain to forge a customs union with the EU, claiming it would accelerate growth and restore confidence in the bond markets. “You’d probably save several billions in debt costs.”

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

The Lib Dems were in fifth place in a recent Politico poll of polls, on 13 per cent and behind Reform UK, Labour, Conservatives and Greens. But Davey said the political landscape was opening up for his party.

He argues that the Lib Dems can fight off Reform in his party’s southern heartlands and take on Farage’s party in areas like the Midlands and the north, where Labour is in retreat.

“We are ready to grow as a party in a way that we haven’t in 100 years,” he said. “We are going for a record number of seats. We are going to be a big surprise and a massive player in the next parliament.”

Ed Davey’s stunts were a staple of the Lib Dems’ 2024 general election campaign © Jonathan Brady/PA Wire

Cheery optimism is part of Davey’s political schtick, as illustrated by his electoral stunts and photo opportunities, but he insisted this assessment was rooted in reality, in spite of the Lib Dems’ anaemic polling.

He pointed out the party had won more council by-elections in the last year than the Conservatives, Labour and Greens combined and predicted that this would continue in May’s elections to the Scottish parliament, Welsh assembly and English councils.

“We have had a record seven years of successive gains in local elections — we’re going to keep that record going,” he said. “But I want to see how we can do in areas where Labour is just disappearing and where we are the only ones who can beat Reform.” 

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Davey’s logic is that the Lib Dems can strengthen their position in the south, where the party won most of its record number of 72 seats at the last election, while building a presence in former Labour territory in the Midlands and north.

Lib Dem prospects will be aided by the drift of the Conservatives, under Kemi Badenoch, towards Reform on issues like immigration, Europe and a sympathy for Donald Trump, he said. 

He claimed the Tories would “do a deal with Reform” in a hung parliament — Badenoch has ruled out any pact — which he said would repulse many traditional Tory voters.

He described the prospect as a “coalition of the hard right, rejecting close ties with Europe, embracing a Trump America, trashing British values that business has loved”.

Davey is determined to pursue his campaign for Britain to rejoin a customs union with the EU, arguing that Prime Minister Sir Keir Starmer will be finished unless he takes bold moves to bolster economic growth.

He said the City approves. “I’ve lost count of the number of business people and in the City talking to us in a way they haven’t before.” He added that the gilt markets would welcome a return to the customs union as a route towards sustained growth.

Davey conceded that could mean Britain having to negotiate with Brussels over the future status of trade deals done since Brexit — including agreements with Trump and India — but argued that the benefits of customs union membership would outweigh any potential downsides.

“Europe is crying out for closer relations with Britain,” he said. But he claimed that Labour’s lack of ambition in areas like the creation of a youth mobility scheme had convinced many European capitals that the UK was not serious about a transformed relationship.

The Lib Dems have won more council by-elections in the last year than the Conservatives, Labour and Greens combined, says Davey © Andrew Matthews/PA

Even though the Lib Dems finished 2025 in fifth place in the polls, Davey insisted he had “never been more ambitious” for his party. “Compare us with every other party in the House of Commons today and we’re easily the most united, with the biggest smile on our face.”

Davey argues that in a fractured political landscape — with five or more parties vying for votes — the Lib Dems can come through the middle and win parliamentary seats with as little as 30 per cent of the vote locally.

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