EU referendum: The business arguments for and against UK membership

The debate has sparked a war of words between business organisations on either side of the debate.

Zlata Rodionova
Thursday 18 February 2016 12:41
Analysis of the connections between the thinktanks and the Leave campaign has revealed close links
Analysis of the connections between the thinktanks and the Leave campaign has revealed close links

Britain will hold a referendum on whether to leave the European Union before the end of 2017.

The debate has sparked a war of words between business organisations on either side of the debate.

As David Cameron heads to Brussels to renegotiate Britain’s new terms of EU membership, we look at the business arguments for and against.

Britain should stay in the EU because:

1. Business needs a strong and competitive EU

CBI: Carolyn Fairbairn, the Director General of the Confederation of British Industry (CBI), came out strongly in favour of staying in the European Union.

In an open letter published by the Financial Times, she argued that a “strong” and “competitive” European economy will be beneficial for all citizens across the continents.

“Looking ahead to the UK’s forthcoming referendum, it is for the British people to decide the outcome but European business strongly supports continued British membership of an EU that takes the necessary reforms to be competitive, outward-looking and continue delivering growth, jobs, peace, security and prosperity for all,” she wrote.

Leaders from 20 other business organisations across Europe have also signed the letter.

2. London could lose a 1,000 banking jobs to Paris

HSBC: The bank has warned that it could shift 1,000 investment banking jobs from London to Paris if the UK is to leave the EU.

Announcing its decision to stay in London after an exhaustive 10-month review, Douglas Flint, HSBC’s chairman said the “best answer” for the bank was for the UK to stay put in a reformed EU.

3. The uncertainty could slow down banking

RBS: Ross McEwan, the chief executive of Royal Bank of Scotland, said the uncertainty caused by the referendum could “slow down banking”.

“The issue we’ve got is the uncertainty which slows businesses down, which will, over time, slow down banking so it’s… really good that the government is trying to have the vote very quickly,” McEwan said on BBC2’s Newsnight.

4. Brexit will cost us in holidays

Goldman Sachs: A surprise vote to leave the UK could hit sterling by as much as 20 per cent, according to estimates by Goldman Sachs, an investment bank.

The worst-case scenario from the bank has the pound sliding as low as $1.15 against the dollar and €1.05 against the euro in the event of a “no” vote, as the influx of foreign cash needed to fund the UK’s persistent current account deficit comes to an abrupt halt. That would hit holidaymakers abroad and drivers as petrol prices rise.

Britain should leave to EU because…

1. Britain’s exit from the EU would have no long-term negative impact on the UK economy

Neil Woodford, a fund manager, said that the economic arguments at either end of the debate lack in credibility.

“I think it's really hard to see any credibility in an argument to stay or to leave constructed around economics. I think it's a nil sum game. If we stay or we leave, the fundamentals of the economy will be relatively unmoved,” he said.

Neil Woodford’s firm, Woodford Investment Management, commissioned a research report from non-aligned firm Capital Economics, into the economic impacts of UK’s withdrawal from the EU.

“It is plausible that Brexit could have a modest negative impact on growth and job creation. But it is slightly more plausible that the net impacts will be modestly positive,” the report concluded.

2. EU causes profit-reducing regulations

Hedge fund manager Crispin Odey, founder of Odey Asset Management.

“We joined an economic union, not a political union, and you should give voters a say,” Mr Odey said.

“This is nothing to do with hedge funds and the EU. My criticism of the EU pre-dates the regulations which have come in,” he added.

Mr Odey has thrown his support behind an organisation called Vote Leave, a lobby group campaigning to “end the supremacy of EU law”.

3. Brexit could lift burden of bureaucracy on UK business

Lord Bamford, the chairman of equipment firm JCB, has backed the idea of Britain leaving the European Union, saying the country could exist “peacefully and sensibly” on its own.

“We are the fifth or sixth largest economy in the world. We could exist on our own - peacefully and sensibly,” he told the BBC.

He said an exit would enable the UK to “negotiate as our country rather than being one of 28 nations”.

Graeme Macdonald, one the top executive of JCB, the world’s third biggest maker of construction equipment, said Britain should leave the European Union if David Cameron fails to negotiate new terms to reduce the European bureaucracy that weights down on British businesses.

“What is needed is a lot less red tape and bureaucracy. Some of it is costly for us and quite frankly ridiculous. Whether that means renegotiating or exiting, I don’t think it can carry on as it is. It’s a burden on our business and it’s easier selling to North America than to Europe sometimes,” he told the Guardian.

4. The EU renegotiations is an opportunity to “rediscover Britain's global vocation”

Some 80 prominent figures and business leaders with Commonwealth links have backed the Vote Leave campaign in an open letter to David Cameron.

Signatories include Pasha Khandaker, President of the UK Bangladesh Caterers Association , Moni Varma, owner of rice producer Veetee, Rachel Kerr award-winning gospel singer, Gurmail Singh Mahli, President of Shri Guru Sing Sabha, the largest Sikh place of worship outside India located in Southall and Tariq Usmani, chief executive of the developer Henley Homes.

“As patriotic Britons of Commonwealth backgrounds, we saw the EU renegotiation as an opportunity to rediscover Britain’s global vocation. As long as Britain’s trade policy is controlled by the EU, we cannot sign bilateral free trade agreements with Pakistan, India, Bangladesh, Australia, New Zealand or for that matter any other non-EU state,” the letter said

The community also criticized UK’s immigration policy which forces them to turn away qualified workers from the Commonwealth to free up space for EU migrants.

“As President of The Bangladesh Caterers Association I know how the 12000 curry houses that we represent across the UK have been struggling to recruit the talent that they need because of the difficulties associated with employing people from outside of the EU. If the UK had a fairer immigration system it would be easier for businesses to recruit skilled workers regardless of their nationality,” said Pasha Khandaker, President of the Bangladesh Caterers Association UK.

Join our new commenting forum

Join thought-provoking conversations, follow other Independent readers and see their replies

View comments