The EU - will the UK stay or go?

25th of November 2015
The EU - will the UK stay or go?

Should we stay or should we go? That is the dilemma the Brits will have to get to grips with in the run-up to their referendum on remaining in the European Union, which could be held as early as May 2016. A ‘no’ vote would have far-reaching consequences for not only Britain but also the EU reports Hartley Milner.

With the exception of a few rebellious MPs, Britain’s main political parties are awaiting the outcome of prime minister David Cameron’s negotiations for EU reform before announcing the direction they will attempt to steer the electorate during the in-out campaign.

The business community, though, has not felt so restrained. The business case, on both sides of the Channel, is overwhelmingly that a divorce would be extremely costly for British exporters and the GB economy.

The EU is Britain’s main trading partner, taking more than €539bn (£400bn) worth of goods and services each year, or 52 per cent of all export shipments. An exit could cost the UK as much as €300bn (£215bn), or 14 per cent of GDP, according to a German study.

But there are those who say that if Britain can negotiate an amicable separation, it could retain its strong trading links with EU countries. After all, non-member nations such as Norway and Switzerland both have sound economies based on strong trading links with the Union. Any loss in trade would be more than offset as opportunities open up in emerging world markets, or so the
theory goes.

The arguments will rage in the months up to the referendum. A bill providing a mandate for the national poll to be held by the end of 2017 was passed by the UK parliament last month.

One thing both sides in the debate agree on is that if the ‘outers’ win the day, and the vote is upheld by the UK government, it could have calamitous implications for the EU, greater even than were Greece to pull out.

Disenchantment with burgeoning bureaucracy and perceived corruption within EU institutions is growing among the European electorate, along with fears about the state of the euro and rapid rise in immigration.

In 2007 a majority of Europeans – 52 per cent – trusted the EU. That level of trust has now slumped to under a third, and the fear in Brussels is that a British exit could trigger a popular revolt and a wave of referenda across the region that would put the very future of the Union in jeopardy.

No concessions

Volker Treier, deputy chief executive of the German Chambers of Commerce and Industry, hinted as much in a recent BBC interview. Calling on German chancellor Angela Merkel not to offer any concessions in upcoming talks with Cameron, he said: “There is a risk that if allowances are made for one country, others will also start demanding negotiations of their membership.”

Treier added that he was “astonished” the UK was even considering leaving and warned that it could lead to a drain of German investment from Britain.

Germany is Britain’s biggest customer in Europe. In July, it took €3.23bn (£2.4bn) worth of GB’s goods and services, while shipments to the Netherlands totalled €2bn  (£1.5bn) and France €1.9bn (£1.4bn). Also in the same month, exports to the US totalled €4.8 bn (£3.6bn) and almost €52.5bn (£39bn) in 2014.

And Marcus Wallenberg, chairman of Swedish bank SEB, said: “The UK stands for a liberal, mercantile idea - far more so than any other European country. It is a very important balancing factor for countries with more of an industry background.”

He feared Britain leaving would weaken the EU’s global influence. “The UK has a tremendous position and influence in areas such as trade and in political clout. Its relationship with the US is something we should be mindful of, and of its positive influence on the continental European debate.”

All this gives Cameron leverage as he negotiates a better deal for GB over the next few months or so, and business is not without sympathy for the UK cause, both at home and in wider Europe.

Benefits for all

Bernd Atenstaedt, chairman of German Industry UK, which represents 100 chief executives of German companies operating in Britain, said: “We would urge the prime minister to convince the British people of the financial, economic and social benefits of the EU for the UK and give a firm commitment to remain in the EU.

“We believe it is in the UK’s best interest to stay in the EU, for the benefit of our employees and, ultimately, the general public.”

But Atenstaedt, whose members employee more than half a million Brits, went on to describe changes to the nature of Britain’s relationship with Europe as “necessary reforms” that Cameron “should be looking to pursue in coming months and years”.

Cameron also has considerable business support at home, reflected in the British Chambers of Commerce’s latest Business Barometer poll of nearly 4,000 companies. The key findings in the survey for the second quarter of 2014 are:

• Most respondents think leaving the EU would be bad for Britain: 59 per cent saying that a full withdrawal would negatively impact on their business (down two points on Q1, 2014).

• But business wants more decisions made in the UK: the most positive scenario being that the UK remains in the European Union, but with specific powers transferred back to Westminster. Sixty per cent of respondents believe this would deliver a positive impact for their business (up six points on Q1, 2014).

• And businesses do not believe further integration would benefit them: 46 per cent saying that remaining in the European Union and integrating further would be a negative outcome (up nine points on Q1, 2014).

“These results show that firms believe a regenerated relationship with the EU, rather than further integration or outright withdrawal, is most likely to deliver economic benefit for the UK,” said director general John Longworth. “They do not want to get caught up in a whirlpool of further integration – only 20 per cent of those firms we surveyed felt that this would be beneficial. Yet the same companies say they do not want to rush for the exit.

“Unless the European Union is perceived to function in the interests of all its member states, it will continue to lose legitimacy, not just among the voting public but among business people as well. The prospects for UK business and trade would be improved substantially if meaningful EU reform were to take place. Too many services companies, which together form the backbone of the UK export base, remain frustrated by the slow progress of the single market in services.”

Secure safeguards

Longworth added that Cameron’s top priority must be to secure safeguards for the UK and other non-eurozone countries in future EU decision-making.

Meanwhile some heavy guns have allied themselves to the pro-Europe cause and have been firing off warnings about the consequences of a UK withdrawal. One of the biggest is Franco-German aerospace and defence giant Airbus, which employes 16,000 people in the UK.

Airbus president Paul Khan said he welcomed the British government’s quest to deliver “positive and hoped-for reforms” and stressed that were Britain to leave the EU the company would not suddenly shut down its plants.

But he signalled: “If after an exit from the European Union, economic conditions in Britain were less favourable for business than in other parts of Europe,or beyond, would Airbus reconsider its future investment in the United Kingdom? Yes, absolutely.”

Serious consequences

Khan’s remarks follow warnings from car giants BMW and Ford that quitting the European Union would have serious consequences for the British economy, particularly since the UK’s car manufacturing sector had become a net exporter with 83 per cent of vehicles it makes being sold abroad.

Other influential pro-Europe players to enter the fray include BAA, the UK’s largest airport operator; Deutsche Bank, the euro-zone’s second biggest bank; Japanese car manufacturer Nissan; the WPP Group, the world’s leading advertising agency; telecoms giant Vodafone and Britain’s own Sir Richard Branson, founder of the Virgin Group. More recently, HSBC announced it was reviewing whether it should move its headquarters out of London, possibly to Hong Kong, and leading credit ratings agency Moody’s said Britain would be forced to negotiate a new trade settlement if it pulled out, or face a downgrade.

However, the chief executive of British construction equipment firm JCB, Graeme Macdonald, believes Britain has nothing to fear from a ‘no’ result in the referendum. He said: “I don’t think it
would make a blind bit of difference to trade with Europe. There has been far too much scaremongering about things like jobs. I don’t think we or Brussels will put up trade barriers.”

Macdonald said red tape and bureaucracy must be reduced, describing some of it as costly and “quite frankly ridiculous”.

“Whether that means renegotiating or exiting, I don’t think it can carry on as it is,” he said. “It’s a burden on our business and it’s easier selling to North America than to Europe sometimes.”


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