EU debate: should we stay or should we go?

Deborah Waddell - CBI

Deborah Waddell – CBI

With the UK set to vote on June 23 on whether to leave the EU or stay in, BLM wanted to look at the issue in the context of international and domestic business – looking at how businesses are likely to vote and what is influencing this.

Welcome to the EU pantomime

It’s a big issue. A gargantuan one in fact, that is unique in that is affects every corner of everybody’s life – from immigration to identity, to health and HR it is the upcoming EU referendum.

For this report we are going to narrow the focus to business and try to gauge how businesses in the South West feel about the issue.

To be honest, as Anna Pepler, MD of HR Dept explains, anecdotal evidence shows that not many businesses are that bothered about the issue and don’t have an opinion either way.

She explains: ‘From my experience, a lot of our customers haven’t had time to think about it. A lot of people say it has come out of the blue and people don’t understand things well-enough to make a decision,

‘If we come out, from an employment law perspective there is likely to be a lot of changes but we don’t know if they will happen quickly or over a longer period.

‘Lots of our regulations come from Europe and our tribunal case law moulds that.’

Polls

As you may expect the issue has prompted a raft of surveys and reports from business organisations and lobby groups.

The results often depend on the affiliation of the organisation carrying them out, it seems.

According to the CBI Director-General, Carolyn Fairbairn, leaving the EU would cause a serious shock to the UK economy, with a potential cost to UK GDP of £100 billion and 950,000 jobs by 2020 and negative echoes that could last many years after that.

PwC report

To quantify the impact on the economy and come to this conclusion the CBI commissioned professional services firm PwC to examine two different exit scenarios: one at the optimistic end of the range, and the other recognising the likelihood of difficult trade negotiations but nonetheless with trade deals being concluded.

Under both PwC scenarios, UK living standards, GDP and employment are significantly reduced compared with staying.

The analysis indicates a cost to the British economy of leaving of as much as £100 billion – the equivalent of around 5% of GDP – by 2020.

Even in a scenario where a Free Trade Agreement with the EU is secured rapidly, the analysis indicates GDP could be 3% lower by 2020. GDP per household in 2020 could be between £2100 and £3700 lower, and the UK’s unemployment rate between 2 and 3 percentage points higher, than if the UK had remained in the EU.

GDP growth in the years 2017-2020 could be seriously reduced – and possibly be as low as zero in 2017 or 2018.

CBI South West Director Deborah Waddell, comments: “This analysis shows very clearly why leaving the European Union would be a real blow for living standards, jobs and growth.

“The savings from reduced EU budget contributions and regulation are greatly outweighed by the negative impact on trade and investment. Even in the best case this would cause a serious shock to the UK economy.”

Phil Smith

Phil Smith

West Country businesses

And the discourse doesn’t seemingly improve for those favouring an exit, if you look at the results from a recent survey by Business West – which is affiliated to the British Chamber of Commerce.

In it, it found that the majority of West Country businesses are concerned about the risks of leaving the EU, and favour staying in the union over leaving by a ratio of over 2 to 1.

The results, based on Business West’s Local Business Survey of over 750 businesses in Bristol, Bath, Gloucestershire, Swindon and Wiltshire in February and March, found that:

• 57% of businesses plan to vote to remain in the EU, compared to 26% that would vote to leave – a 2:1 ratio.
• Over a third (39%) of businesses feel they need more information before making an informed decision
• Almost two thirds of exporters (65%) would vote to remain in the EU
• The significant majority of firms believe that leaving the EU would pose a risk to the UK economy (78%), and their business (68%)
• When asked about the Prime Minister’s reform package, three quarters of businesses said that it hasn’t affected their voting intentions

Phil Smith, Managing Director of Business West, comments: “West Country businesses have differing views on Europe, but a clear majority favour staying in the European Union, with over twice as many business people saying they will vote to stay in the union rather than voting to leave.

“Those businesses who want to stay in the EU say that easy access to the EU Single Market and the greater ability to attract new investment into the UK are major benefits.

“These firms are worried that leaving the EU would jeopardise the ability to sell into the UK’s largest market and hurt the economy.

“Other businesses are worried about the uncertainty that leaving the EU would bring, and the lack of clarity about what a potential ‘Brexit’ would look like.

“Over two thirds of businesses feel that leaving the EU would pose a risk to their business, and over three quarters believe is would pose a risk to the UK economy.

“Those that want to leave think the EU is too big and too bossy, and that costly regulations are a barrier to their growth.

Arron Banks

Arron Banks

He continues: “This is notable in particular sectors such as chemicals and food and drink industries, and on some smaller businesses where regulations like the Working Time Directive are seen to be an unnecessary burden.”

Business reaction

But what do business owners on the ground think?

Grant Jefferies

Grant Jefferies

Grant Jefferies, who runs building firm Bray & Slaughter, says: ‘On a typical project for us the windows will be from Scandinavia, – the air conditioning form France, the bolt flooring from Spain and the lift from Greece, so the reality of how schemes are built means sourcing products from Europe and what impact will an exit have on this process?

‘Are we going to start manufacturing these products ourselves again? The issue is tooling and investment. We ran a bespoke joinery business and the reality is tooling, certification and capital investment is huge.

‘Dyson is very smart and has a great team around him and he concluded that he couldn’t manufacture vacuum cleaners in the UK. So if he reached that conclusion I’m pretty sure we’re not going to be able to make doors more competitively than companies in mainland Europe.’

For property markets just debating the issues is having an impact according to Chris Dawson at Colliers.

He says: ‘It is already having an impact in terms of a slowdown in the investment market and bigger transactional activity, which is nowhere near as strong as it was. People are holding off making decisions until we know either way.

‘We see that as largely Brexit at the moment. If we do exit, we run the risk of being marginalised. There will be a period where it drops – and then it will eventually pick back up – but there will be a year of uncertainty.’

Brexiteers

Bristol businessman Arron Banks is unequivocally pro exit.

One of the founders of the Leave.EU website and a financial backer of the anti-EU political party UKIP – he spoke to Business Leader in 2015 about the upcoming referendum.

He said: “For a start 80 per cent of SME businesses don’t export to Europe but have all of the regulations that cost them millions.

“The Euro is a political project that is trying to create a united states of Europe; that does not benefit UK businesses as it is about corporate businesses, rather than small and medium sized firms that are the engine of the UK economy.

“We are running a trade deficit and the Prime Minster saying he is going to get a better deal is just a show.

“We need to vote no for a proper re-negotiation, so we can trade with Europe and the rest of the world, without being governed by Brussels.”

He went on: “Why are we tying ourselves to a low grade economic block anyway? We are trading too much with Europe and it is to our detriment. We used to trade with the world and can do so again.

“It makes economic sense to leave as the EU will soon disintegrate and break apart – as it looks to hold Spain, Greece and Italy together.”

 

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