26 May 2015

  |  CBI Press Team

News

Five reasons for staying in a reformed EU

We’re not saying the UK couldn’t survive outside the EU, but the question is whether it would thrive.

This week, the CBI called on business leaders to speak out early in favour of remaining within a reformed European Union.With a Referendum Bill likely to feature in this week’s Queen’s Speech, the country will soon face a stark choice a choice between openness and isolation.

I would never claim there is a uniform business view on this issue, and we respect the diversity of opinions. However, I do speak for the majority of CBI members, who together employ nearly 7m people about a third of the private-sector-employed workforce and most of those firms believe that our interests are best served in a reformed EU.

As the CBI celebrates its 50th anniversary this year, I’m proud of our history as a confederation of 140 trade associations. Our creation out of the British Employers’ Confederation, the Federation of British Industries and the National Association of British Manufacturers means that the bulk of our members are small and medium-sized, and sit alongside bigger players.

I’m not saying the EU is perfect, and we support the Prime Minister’s efforts to secure ambitious reform as he sets about his renegotiations. The principle of subsidiarity will need to be on the table, giving national parliaments a greater say on areas better made at country level, including interpreting EU employment rules such as prescriptive regulation around working hours and agency workers.

In recent days we’ve seen positive signs from Brussels, with progress on a digital single market to lower barriers to e-commerce and a rebooted agenda to cut the burden of business regulation on smaller firms. But we need the EU to go further in making progress on completing the single market, including services; keeping momentum going on trade deal talks; and ensuring that Britain’s influence does not become diluted by the eurozone’s drive for greater integration.

The challenge for those arguing that the UK should stay in the EU is the same as for those pressing for an exit: to offer a clear, evidence-based vision for the future.

Let me give five reasons why membership in a reformed EU is good for our economy.

 

1. Access to the single market

First (Other OTC: FSTC - news) , access to the EU single market of 500m customers has been crucial for the fortunes of thousands of small and medium-sized firms who form part of larger supply chains.

Take Airbus, which has raised its concerns about leaving the EU. It does extensive trade in Europe, and has a UK supply chain worth £2bn. The company’s Broughton site employs 6,500 people directly and 2,000 in the supply chain, making it one of the biggest private-sector employers in Wales.

 

2. Setting the trade agenda

Secondly, being in the EU lets us set the trade agenda with our European allies.

We could be signing the biggest free trade deal ever with the US. We would look to negotiate trade deals with the rest of the world if we left the EU, but we’d be doing so with a weaker hand and have to start from scratch with 50 countries. Who knows how long that would take and how much disruption British firms would face?


3. Strengthening the City

Thirdly, Europe and the City have a mutually beneficial relationship. Europe needs the City to support growing firms’ access to finance, while the City needs Europe as a gateway to clients, business and investment. Deutsche Bank, which employs 9,000 people in the UK, has already sounded the alarm about the possibility of Brexit.


4. Consumer choice

Fourthly, for consumers, being part of the single market means business can offer more products and services, at lower prices. As well as opening up markets, common EU standards have led directly to safer and more environmentally friendly products, from fridges to medicines.


5. Access to talent

Finally, the UK economy also benefits from access to talent across the EU and immigration more widely. It allows businesses to recruit from an EU-wide talent pool to plug skills shortages.

Of course, we need to do more to boost skills for UK citizens and help people progress into higher-paid, higher-skilled jobs. And we need to ensure we avoid negative social impacts on people and communities, with freedom of movement equating to freedom to work and not to claim benefits.

 

The alternatives don't stack up

As for the alternatives to full EU membership, such as emulating Norway, Switzerland or Turkey, they simply don’t stack up.

Consider Norway. It’s not a member of the EU, but is part of the single market through the European Economic Area agreement. This gives it access to European markets and allowed its government, at the time of signing, to exempt industries such as fisheries and agriculture from EU rules. This works for Norway’s economy, built on plentiful natural resources and with a far smaller population than Britain, but would be no good for an economy as complex as ours.

In return, Norway, under prime minister Erna Solberg, is the 10th-highest contributor to the EU budget, but it lacks any clout over EU decision-making because it has no seat at the table: no commissioner, no MEPs and no ministers attending European Council meetings.

The Swiss appear to have much greater flexibility. Their relationship with the EU is governed by a free-trade agreement and 120 specific bilateral agreements. In theory, it can pick and choose the regulations it wishes to apply. But reality tells a different story. It took nine years for the Swiss to negotiate the labyrinth of access arrangements, and it still has no agreement to ensure access to the European market in services — a major part of the UK economy.

And in the cases of Norway and Switzerland, both need to comply with the principle of freedom of movement.

Turkey is part of a customs union with the EU, and although it prevents duties being introduced on most goods, there would be no action on non-tariff barriers, meaning differences in product regulations that cost business.

Let’s be clear: we’re not saying the UK couldn’t survive outside the EU, but the question is whether it would thrive. And for those advocating exit, they need to offer a credible and prosperous alternative.

As the CBI marks its golden anniversary, we are positive about Britain’s future. So we support the Prime Minister’s drive for a more competitive EU.

We believe we can win the EU arguments both here and in the corridors of Brussels to ensure we have an economy that can deliver growth, jobs and prosperity for everyone in Britain and Europe.