Europe: In or Out?

As the In/Out debate reaches a critical point, we examine the influence the EU has over business in the UK, and how leaving could impact Sussex

It’s been the hot potato in UK politics for more than 30 years now, but with the general election looming next May, the in/out EU debate is finally approaching boiling point.

David Cameron has pledged to hold a referendum by the end of 2017 if the Conservatives win an outright majority at the next general election. He claims he is the only prime ministerial candidate who can guarantee an EU referendum. However, he also said he is confident that he will succeed in negotiating major reforms to Britain’s EU membership before the election.

These reforms will focus on the last of the four original freedom of movement goals: capital, goods, services and labour. These would be refocused to enable people to continue working all over the EU, but not to claim benefits.

He said: “The right to go and work in France or Spain, or Spanish people to come and do a job that has been advertised here – that is one thing. But it is a completely different thing to be able to go to claim benefits, actually even to work in Britain but to send your benefits home to your families that stay in your home country.”

The Prime Minister insisted that he would be successful in his negotiations. “I want the 27 other countries in Europe to see that there is a plan here – that  reform can end with a reformed EU and a reformed relationship with Britain and Britain staying in,” he said. “I want them to see that that is the goal. If I don’t achieve that it will be for the British public to decide whether to stay in or get out.”

On BBC One’s Andrew Marr Show, Cameron said: “I have said this all my political life – I’ve said if I thought that it wasn’t in Britain’s interests to be in the EU I wouldn’t argue for us to be in it. I am just a deeply patriotic politician and person. I do this job because I love my country, I care passionately about its future and I want it to be a strong, proud, self-governing independent nation.”

Ed Miliband has said an EU referendum would be ‘unlikely’ under Labour, but that he would guarantee one if the UK was asked to transfer more powers to Brussels. He claimed the UK was “being dragged to the exit door” under the Conservatives and in contrast he would set out a ‘clear lead’ on when a referendum would be appropriate.

Miliband claims the following reforms should be made to the EU:

• Completing the single market in energy, services and the digital economy

• Lengthening the transitional period during which restrictions can be curbed on immigration from new member states

• Making it easier to deport recent immigrants who have broken the law

Effect of EU referendum on UK business

In light of Cameron’s speech, a group of senior politicians and business people, including Ken Clarke, Lord Mandelson and Sir Martin Sorrell (WWP), have written a letter arguing that a referendum on Europe could cause ‘considerable uncertainty’ and ‘great political risk for the UK in coming years’.

They wrote that Britain should
instead unite ‘in its aims to bring change and reform to the EU’ and
not to ‘abandon it’.

Speaking on Radio 4’s Today programme, WWP Chief Executive Sir Martin Sorrell claimed an EU referendum would be ‘even more disruptive’ than the Scottish referendum. He said it would pose a ‘very strong’ threat to recent economic growth enjoyed in Britain.

Growing numbers of financial groups are warning that leaving the EU would damage the economy.

Banking giant Citi is the most recent to have spoken out about the issue, with Chief Executive Officer Jim Cowles insisting that clients from Europe, the Middle East and Africa are becoming increasingly concerned that the UK will no longer be an attractive or viable location for services.

“It is not that international companies will stop investing in Britain, but their investment just will not be at the scale we have become accustomed to,” said Cowles.

According to the most recent Business EU Barometer conducted on 3,451 businesses by the British Chambers of Commerce (BCC), most (59%) think withdrawal from the EU would be bad for Britain and impact negatively on their business. However, 60% said they would support reforms that transfer powers back from Brussels to Westminster.

John Longworth, Director General of BCC commented: “These results show that firms believe a renegotiated relationship with the EU, rather than further integration or outright withdrawal, is most likely to deliver economic benefit for the UK. They do not want to get caught up in the whirlpool of further integration – only 20% 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 of its member states, it will continue to lose legitimacy not just among the voting public but among business people as well,” he continued. “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.Yet the completion of the Single Market, no matter how huge an opportunity, is not the most important element of any negotiations the Prime Minister undertakes with the UK’s European partners.”

Longworth added: “The top priority must be securing safeguards for the UK and other non-eurozone countries in future EU decision-making – so that as eurozone countries look to integrate further, a new architecture is put in place to ensure non-eurozone states are not disadvantaged in the future governance of the Single Market.”

How will Sussex be affected?

Rob Clare, former RBS banker and present Director of Innovation Capital Limited in Falmer, believes Sussex will weather the ‘in/out’ storm: “When big choices are presented with clear ‘yes/no’ or ‘in/out’ questions I think human nature dictates that all the data, all the rhetoric and all the ‘expert’ opinion simply washes over most of us. Most of us end up making a gut based decision, influenced by our personal bias. Most of us have an opinion on further EU integration, renegotiation of the UK’s position, or exiting altogether – but what feeds that opinion is perhaps more fear than fact.

“Fear either of an EU backlash if we leave, with prohibitive trade tariffs, relocation of manufacturing jobs, a shift in world financial centres or of a loss of sovereignty and control of our laws and our borders if we see further integration.

“Many businesses therefore prefer the middle ground – the latest British Chambers of Commerce ‘EU Barometer’ survey suggests that the majority of UK businesses think that a renegotiation is best for their prospects, stay in but transfer powers back.”

He continued: “The prospects for jobs and trade in Sussex, whether we’re in or out, are in my view uncertain. The CEBR suggest 4 million UK jobs depend on trade with the EU but I don’t subscribe to the view that if we’re ‘out’ we will become isolated and suddenly these jobs will disappear.

“At a national level it is a fact that the EU is our main trading partner worth around £400bn a year and about 50% of total trade in goods and services. On the other hand when you look at the mix of that trade, the structural economic strains across the EU and where future global economic growth will be, it is by no means certain that being ‘out’ will have much lasting impact on the UK and Sussex based businesses.

“History tells us we are a successful trading nation, perhaps the most successful. Our ingenuity and spirit, which abounds in Sussex, will I believe see that success continue whether there is a referendum or not and whatever that referendum concludes. The real question is whether that continued success will in the short term be made all the more difficult by being ‘out’,” he added.

“Putting the emotive arguments favoured by some aside, the logic and the data tell me that we are better off in the EU, negotiating our position from the inside.  By 2017 the UK expects to have seen 3 years of solid GDP growth around 3-3.5% p.a. and the last thing we need is for that to be derailed.”

As a member state, the EU has a significant influence on business in the UK – through taxation, spending, laws, regulations and directives. According to Serena May, Director of HR Department in Eastbourne, while many small businesses see these regulations as unecessary red tape, quitting the EU might not provide the solution they hope for.

“Should the UK quit the EU it would need to renegotiate its relationship with Europe which may include new agreements on employment law and regulations,” she says. “There are five main areas of employment law that could be affected: Redundancy, Working Time, Human Rights, Discrimination and TUPE. Any changes to these laws would impact both employers and employees.

“Whilst many SMEs feel that EU derived legislation is burdensome, the reality of leaving the EU may not be the panacea they might hope. Many employees have clauses in their contracts related to protections derived from the EU on matters such as holiday pay or working hours. Employees have come to expect these rights and the consequence of change may necessitate adjustments to employment contracts, with a possibility of termination of employment then re-engagement on revised terms. This will not only be an additional headache for employers but could have serious implications on employee relations.

“It’s worth noting however, that withdrawal from the EU will not automatically revoke UK laws brought in as a result of EU Directives. The effect on UK employment laws would depend largely on the extent to which the Government could convince Parliament and the wider public of the need for change.”

Do you have an opinion on whether or not there should be an In/Out Referendum? Join the conversation @sussexbusiness