EU referendum: British business makes a strong case on Europe

The EU has its problems, but leaving the Union will make no business, big or small, better off

(Getty)

Everyone from the boss of Vodafone to the chief executive of the Waterloo Tea Company wants Britain to stay in the European Union. Quelle surprise, you may well groan. After all, big business has always been in favour of “Europe” for good, and, sometimes, less honourable reasons.

Large transnational companies do more business across more borders than ever before and in virtually every economic activity they conduct, from manufacturing cars and armaments to processing financial transactions and designing buildings, the idea of having to navigate tariff walls, customs declarations, work visas, different standards and any other of the myriad barriers to trade must be depressing indeed.

For this is what the single market, the free movement of labour and capital, and the spirit of the EU is all about – making pan-European business work better for all. If Britain were to place itself outside that market then such flexibility and efficiency would be badly threatened. The chances are that Britain would lose out – especially so in manufacturing, where so much inward investment depends on easy and trouble-free access to a large and prosperous, albeit slow-growing, European market.

It is possible, as the anti-EU lobby maintains, that trade means so much to the Europeans that they would never erect barriers to UK firms. But think back to the situation before 1973, when we belatedly joined the European project. In the 1950s and 1960s, Britain was also a tempting market for fast-growing European firms, but their governments still kept us out to protect their own industries and farmers, maybe at some economic loss to themselves. Governments, like people, sometimes operate outside the bounds of strict economic rationality.

One powerful argument the EU would have is that the UK would no longer operate the Social Chapter, so why should they allow this sweatshop island with poor worker protection to undercut their own workers? A compensatory tariff to eliminate such a competitive advantage would probably be irresistible. It is also fair to point out that some complex operations could simply not take place in such an environment, and would gravitate towards the larger market: the 500 million Europeans rather than 60 million Britons. Their support for the EU is at least a welcome signal that the corporates wish to operate where workers do enjoy basic rights.

Where these businesses may be a little complacent is in underestimating the need for EU structural reform, and overstating David Cameron’s success in delivering that in his so-called renegotiation. As most can see, it was nothing of the sort. The problem of competitiveness in world markets lies behind much of the economic dislocation that has afflicted the EU for almost a decade. Leaving the bloc would not necessarily mean a successful refocusing on faster-growing economies such as India or China – if indeed they continue to grow as quickly as they have – and trade with the EU doesn’t prevent trade with the rest of the world. Exporting has never been a zero-sum game. The reason for Britain’s relatively lacklustre record in selling to China, for example, has little to do with being in the EU, as the rampant success of German efforts amply demonstrates.

The last time a European referendum was held, in 1975, big business was also in favour of membership, many mistakenly taking it to be a panacea for an ailing economy. Now we seem ready to fall for a different myth – that Europe, with its eurozone and migrant crises, is the source of all our misfortunes.

The EU has its problems, but leaving will make no business, big or small, better off.