Business needs to engage in shaping Britain's post-EU future
There is a very good reason why so few business people make it big in Westminster: they are shockingly bad at the dark arts of politics.
Britain's business community has yet to fully grasp the seriousness of the public's euroscepticism, or that there is now a high chance of a referendum on the UK's membership over the next few years. Photo: EPA/OLIVIER HOSLET
By Allister Heath
6:00PM GMT 20 Nov 2012
Bizarrely, entrepreneurs and executives who excel at understanding what consumers want to buy become utterly baffled at their behaviour once they step into the polling booth. The thorny issue of the UK's relationship with Europe perfectly symbolises how out of touch so many City grandees have become.
Britain's business community has yet to fully grasp the seriousness of the public's euroscepticism, or that there is now a high chance of a referendum on the UK's membership over the next few years. Withdrawal has become a genuine possibility, with some sort of negotiated loosening of ties more likely than not. The eurozone needs to integrate more quickly if it is to survive, and the UK will necessarily become even more isolated as a result. Even without that, the current arrangements are untenable: few in the UK are happy with the present levels of centralisation or set of institutions, while Germany and others have lost patience with Britain.
Of course, polls may exaggerate eurosceptic sentiment. A fierce, divisive campaign could lead to unpredictable outcomes. But the establishment-backed movement for the alternative vote was comprehensively destroyed in last year's referendum and a disillusioned and angry electorate is unlikely to be easily bullied into supporting a status quo on Europe they have come to hate.
The problem is that, while most business people now realise that the solution is a global Britain, trading with the world, not one obsessed with a declining EU, some of the largest firms and most of their lobbying organisations are terrified of change. They remain wedded to the traditional view that full EU membership is essential for trade and are desperate to maintain the status quo, regardless of the gigantic costs.
Most large financial firms profoundly dislike the way that the EU is taking control of regulation and is clearly intent on crippling the City of London. Yet they and their lobbyists still feel that there is no alternative, that the single market needs to be preserved at all costs and that no repatriation of powers can ever be countenanced.
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At the end of the day, they argue, we have no choice but to try to influence marginally whatever dodgy deal is hammered out in Brussels – and then grin and bear it. Many big firms and City groups have become part of the problem, not the solution; their support for an evidently flawed corporatist system and their general defeatism is at once astonishing and exasperating.
It is time for a savvier, more positive attitude from business. Rather than hoping that euroscepticism will eventually go away, the City needs to view a loosening of Britain's ties with the EU as an opportunity to help shape and influence a new, improved economic policy to guarantee the UK's long-term prosperity.
Companies must accept that the UK's relationship with the EU is going to change and start contributing to the debate on how to make a post-EU Britain workable for business. We need successful firms to tell us which of the different alternative trading models they would prefer; whether they would rather have unilateral free trade or see the UK joining the European Free Trade Association or some other grouping; how they think the free movement in people can be preserved; and how to ensure that global finance doesn't fragment more than it already has.
In truth, many firms are already busily developing their own post-EU future; their experience and challenges in selling to the Middle East, Latin America, Africa and Asia will be invaluable in the looming European debate.
In 2012 so far, 44.5pc of all UK goods exports went to the eurozone, down from a peak of 56.1pc in 2006, an analysis of the official statistics by the Centre for Economics and Business Research reveal. Goods exports to non-EU nations rose by 2.4pc in September, while exports to the EU fell by 0.1pc.
One of the greatest myths about world trade is that tariffs remain high or there are no alternatives to the EU when it comes to trading blocks. The reality is that vast progress has been made towards truly free global trade; a post-EU Britain wouldn't see itself blocked out from most markets, thanks to the World Trade Organisation.
Take the UK's imports from outside the EU, which are governed by WTO rules: 75pc face no tariffs whatsoever, while the remaining 25pc are hit by an average levy of just 6.4pc. The world also now boasts 300 or so trade agreements, the overwhelming majority full or partial free trade areas, such as the North America Free Trade Association, which, unlike the EU, don't also involve a political dimension.
The only significant categories of UK goods imports from outside the EU that bore average rates of customs duty in excess of 5pc in 2010 were footwear (where charges of 9pc are applicable) and apparel, where the tariff levied ranged from 5.6pc to 8.2pc. Of the major categories of imports from outside the EU, only clothing, "edible fruit/nuts, citron peel", "plastics/articles thereof" and "vehicles" suffered from average rates of duty of over 2pc. It would be irritating but hardly disastrous for UK-based car manufacturers were the EU to start charging tariffs of 3.7pc on British-made cars following a UK withdrawal from the EU, rather than zero today.
There would, of course, be genuine costs to a UK withdrawal from the EU and business's input is needed to try to find a way of minimising these. But there would also be huge benefits, especially if the British Government made use of the opportunity to deregulate the economy, reform our tax system and improve our competitiveness by ditching EU red tape.
Crucially, eurosceptic business people need to do more to convince their more pro-EU colleagues. We urgently need a new anti-EU but pro-free trade business campaign group, modelled on Business for Sterling, the organisation founded by Lord Leach that did so much to save the pound and defeat those who wanted to impose the euro on Britain in the 2000s.
This new grouping would bring together the silent sceptics to be found in thousands of boardrooms across Britain and play a leading role both prior and during the referendum campaign, making it clear that modern, pragmatic business leaders have moved on from their erstwhile reflexive europhilia and that jobs are no longer contingent on membership of the EU.
Rather than fighting the inevitable, and facing yet another nasty reputation-trashing showdown with the public that they cannot win, big business and the City need to accept that the UK and EU are heading for a divorce – and learn to make the most of it.
Allister Heath is editor of City A.M.
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