EU referendum: What does business think about Britain’s membership – and why?

Firms have been encouraged to speak out on Brexit. But some are more willing than others to do so

Michael Bow
Wednesday 24 February 2016 01:45 GMT
More than a third of companies in the FTSE 100 have backed the UK remaining in the EU
More than a third of companies in the FTSE 100 have backed the UK remaining in the EU

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Louise Thomas

Louise Thomas


In 1991 British Airways put an end to its policy of donating to the Conservative Party after admitting it had “come to the view that it is not our money to hand out – it belongs to the shareholders”.

We have since grown used to the idea of non-political corporations. But sometimes politics still intrudes.

The debate over Brexit following David Cameron’s European Union deal on Friday has prompted an array of Britain’s corporate giants to nail their colours to a quasi-political mast.

More than a third of companies in the FTSE 100 – including well-known names such as Marks & Spencer, Kingfisher, Vodafone, BT and Asda – have backed the UK remaining in the European Union in a letter published in The Times .

Business figures urging Britain to leave are less numerous – but still make up a sizeable tribe. John Mills, the millionaire Labour donor and founder of the consumer products empire John Mills Limited (JML), is among the supporters of the Vote Leave campaign.

Meanwhile, Joe Foster, the co-founder of sportswear brand Reebok, and John Caudwell, the founder of retailer Phones 4u, have also backed the Brexit cause.

What has driven some leaders of corporate Britain to open their mouths? And why are other bosses still choosing to keep quiet, despite the business buzz around Brexit?

Business lobby groups say it is healthy for firms to speak out on political matters.

“Business leaders will take different positions, but they should not be afraid to stand up,” said the Institute of Directors boss Simon Walker.

“This referendum is a momentous political choice. We need to make sure it’s a well-informed one.”

Bosses have been putting their heads above the parapet because, mainly, of two factors: fears of higher business costs resulting from Brexit, and explicit encouragement from 10 Downing Street.

The 36 six FTSE 100 companies signing the letter– which said Brexit would “threaten jobs” – are mostly multinationals with significant overseas operations.

Companies such as BAE Systems, BHP Billiton, Burberry, Rolls-Royce and Centrica generate a big portion of their annual revenues in foreign markets. Meanwhile other signatories, like AstraZeneca and BP, employ most of their staff outside the UK, despite being based in Britain.

Foreign-based companies with a strong UK presence – such as Ford, General Electric, Cisco and Siemens — are also likely to face commercial pressure if Britain votes to leave.

As “In” campaigners are keen to point out, continental Europe is the UK’s main trading partner, with one in every two items shipped out of the UK each day going to the EU. One in every two items imported into the UK also come from Europe.

If Britain votes to leave on 23 June, it will trigger a two-year window of tough re-negotiations of trade treaties that the UK has signed through the EU. These could leave multinational companies worse off if the UK has to pay import and export tariffs.

The climate has also changed due to an orchestrated PR campaign by Mr Cameron encouraging business leaders to voice support for Europe in public.

Despite government aides reportedly telling bosses last year to “shut up [on Brexit] until a deal is done with the EU”, the Prime Minister signalled a change of approach in the autumn by giving chief executives in his business advisory group the green light to speak out publicly.

Despite this, a host of FTSE bosses have declared it was not their place to tell the public how to vote – a signal that not all are comfortable getting involved in political issues for fear of alienating customers.

The likes of Ladbrokes, housebuilder Persimmon, InterContinental Hotels Group (IHG) and lender Provident Financial all said they were neutral on the issue.

“We are not getting involved in the politics of the debate – all we are interested in is the betting,” said Ladbrokes boss Jim Mullen. “I wouldn’t tell customers or colleagues what to vote, I want them to bet on it. All we are interested in is 2/5 that Britain remains in, or 7/4 that we exit.”

Jeff Fairburn, the boss of Persimmon and a business adviser to Mr Cameron, said: “We’re pretty much a domestic business. We employ a predominantly UK workforce and the majority of our materials are sourced in the UK. We as a board have decided to take a neutral stance, as we’re keen that individuals make their own decisions.”

Richard Solomons, chief executive of Intercontinental Hotels, also said his company was taking a neutral position, and played down the prospect of any significant impact on the business either way. Peter Crook, boss of Provident Financial, added that the debate was a “second-order issue for us” and had not been considered by the board.

Seven of the Prime Minister’s business advisory group are sitting out the debate, at least for now. These include Legal & General boss Nigel Wilson, Severn Trent’s Liv Garfield and Steve Varley, the UK chairman of accountancy giant EY – although this does not imply they support Brexit.

Supermarket giants Sainsbury’s, Tesco and Morrisons – among the biggest employers in the UK – are also on the sidelines.

Meanwhile Barclays bank refused to sign the letter but did say that staying in the EU would be “in the interests of customers and clients”.

Outside the corporate world, big hitters like Bank of England Governor Mark Carney are also playing down their views on the referendum.

Mr Carney said that the Bank was “not making a judgement about the potential outcome of the referendum”, adding that it was treating the vote “exactly how we treat any other political event.” But financial market are sceptical. Sterling remained down at seven-year lows against the dollar as investors shunned the pound.

The outcome of the referendum is still four months away. But it might be even longer until we know whether dabbling in politics was a wise corporate choice or not.

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