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Our membership of the EU’s Single Market is a huge asset for British business. It guarantees our exporters tariff-free access to the world’s largest market, the destination of 45 per cent of our exports. Companies can source products and people from a bloc with a population of 500m. The Centre for European Reform has shown that the “EU effect” boosts goods trade with the EU by 55 per cent. That works out at an average of £670,000 for every business that conducts goods trade with the EU.
The extraordinary amount of foreign investment into Britain has to do with many things – our language, legal system, and timezone, to name but three. But there is no doubt our place in the EU is a contributing factor. European investors are responsible for 46 per cent of our stock of foreign investment. And non-European companies, from American banks to Japanese car manufacturers, set up shop in Britain to access the European market. This investment creates jobs for our citizens and opportunities for British businesses – and we’d be putting that at risk if we were to leave.
The City has a particular interest in remaining in the Single Market. London is Europe’s financial capital, accounting for 74 per cent of the EU’s foreign-exchange trading and half of its pension assets. And the EU is the destination for a third of our exports of financial services. As part of the Single Market, banks benefit from an EU passport which allows them to operate across Europe. Leaving would throw this advantage away. Furthermore, we would lose all influence over EU regulation, and would face attempts to lure businesses from London to Paris, Frankfurt, and Dublin. As Mark Carney said this week, we should be very wary of basing our economic strategy on “the kindness of strangers.”
Politicians of all stripes agree that we need to build a “knowledge economy”, taking the lead in hi-tech industries. The EU’s £57bn Horizon 2020 programme dispenses research grants to institutions embarking on cutting edge research. The latest figures show the UK receiving 20 per cent of the grants, more than any other member state, and 126 British SMEs have benefited from Horizon 2020 funding. Universities and scientists are clear that they are stronger in Europe, and that leaving would damage research-intensive industries.
One would expect those who want us to leave the EU to have come up with a thought-through alternative to membership. They have yet to do so. If we leave, will we be in the Single Market, like Norway, forced to implement rules we have no say in making, and continuing to pay into the EU budget? Will we, like Switzerland and Turkey, have Single Market access for goods but not for services, which make up 78 per cent of our economy? Or will we be outside the Single Market entirely, facing tariffs, red tape, and regulatory divergence?
The various Leave campaigns are asking us to set out on a journey without a destination or even a map. Instead of developing a plan for exit, they have tried to intimidate businesspeople into staying quiet, through sending hecklers to the CBI conference.
The EU is far from perfect. There are many things that need to be done to make it work better, and I am glad the Prime Minister is focusing on competitiveness and protections for non-euro states in his renegotiation. Through the conversations I have had with those who run businesses both large and small, I know that the large majority believe that we are stronger, safer, and better off in the EU.