22 October 2015

Financial Times: Europe boosts Britain’s strength on the world stage

The biggest risk facing British business today is the possibility of leaving the EU. This is an argument I hear regularly from both businesses based in the UK and those thinking of investing here.

On top of powerful interventions from the CBI, the UK business lobby group, and the governor of the Bank of England this week, three other events have underlined the value of EU membership and single market access to Britain’s employers and wealth creators.

First, member states have agreed to fast-track a capital markets union, which will make access to finance easier for British businesses, demonstrating the worth of a British commissioner influencing reform from within.

Second, the EU has announced plans to negotiate free trade agreements with Australia and New Zealand, highlighting the benefits to UK exporters of being part of the world’s largest trading bloc.

Third, the visit of the Chinese president and investment agreements with China shows there is no false choice between Britain’s role on the world stage and EU membership. They are mutually reinforcing.

Try as some might to underplay them, the economic benefits of our membership are overwhelming. Some 45 per cent of UK exports are sold to the EU, which supports approximately 3m jobs. If Britain left the single market, we could face the common external tariff, which — given that 40 per cent of our exports to the EU are in high-tariff industries such as cars, chemicals and food — would have a detrimental impact on businesses and households alike.

The free movement of capital in the EU means multinationals, such as US and Swiss banks and Japanese car manufacturers, invest in Britain to access the European market. Leaving the EU would mean those investors could lose their runway into the single market.

The Out campaigners have an urgent challenge: to prove their assertions with facts, or accept that the reality of “out” for the UK is unknown. So far, all their arguments have offered emotion but not evidence.

The truth is, being in Europe gives us leverage. We have the commissioner for financial services and the third-highest number of votes in the EU parliament and council. That is how Britain helped to stop the financial transactions tax being adopted as EU policy. If we left, we would cede our influence to shape economic reform. This is not denied by Out campaigns, just overlooked.

The claim that leaving means regaining control is a perplexing one. Leaving Europe means losing control. Norway and Switzerland are often held aloft as models to follow. But both countries have to follow the very employment regulations and freedom of movement rules cited as reasons for us to leave.

Outside the EU, we would be reduced to defending one country’s interests against those of 27, a nation of 65m and 2 per cent global GDP against a bloc of 500m and 16 per cent. As someone used to negotiating business deals, this does not seem a strong hand.

There has been no credible articulation of how businesses can retain, let alone improve upon, the benefits we currently get from the EU by walking away. Asserting that a trade agreement will be reached with no detail of the terms, or indeed which deals could be reached with non-EU countries, is a time-limited position before serious questions will need to be answered.

The process of leaving would itself create years of uncertainty. Triggering Article 50 of the Lisbon Treaty would mean that to negotiate our way back to a trade deal with the rest of Europe would take two years. We also have free trade deals with more than 50 countries around the world — we would have to start from scratch, taking years just to get back to where we started from.

There is simply no business case for leaving Europe. It would be a leap in the dark we cannot afford to make.

Full article in Financial Times (subscription required)

© Financial Times